A machine that produces cellphone components is purchased on January 1, 2016, fo
ID: 2586382 • Letter: A
Question
A machine that produces cellphone components is purchased on January 1, 2016, for $196,000. It is expected to have a useful life of four years and a residual value of $12,000. The machine is expected to produce a total of 200,000 components during its life, distributed as follows: 40,000 in 2016; 50,000 in 2017; 60,000 in 2018; and 50,000 in 2019. The company has a December 31 year end.
1) Calculate the amount of depreciation to be charged each year using the DOUBLE DIMINISHING BALANCE METHOD.
Rate:
Annual Expense for
2016:
2017:
2018:
2019:
Explanation / Answer
1) Calculate the amount of depreciation to be charged each year using the DOUBLE DIMINISHING BALANCE METHOD.
Straight line rate = 100/4=25%
Double decline rate = 25*2 = 50%
Annual expenses Accumlated dep Book value 2016 98000 98000 98000 2017 49000 147000 49000 2018 24500 171500 24500 2019 12500 184000 12000 Total 184000