A new machine tool is being purchased for $25,000 and is expected to have a zero salvage value at the end of its 5-year useful life. Compute its DDB depreciation schedule. Assume any remaining depreciation is claimed in its last year.

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andromache andromache · Answer 1 · 2020-04-18T03:38:33+02:00

Answer:

The depreciation schedule is shown below:

Explanation:

The computation of the depreciation expense under the two methods i.e straight line method and double declining method

Straight line Depreciation rate is

= $25,000 ÷ 5 years

= $5,000 per year

And, the rate is

= $5,000 ÷ $25,000 × 100

= 20%

And, the double declining rate is

= 1 ÷ 5 years × 2

= 40%

So, the depreciation schedule is

Year Book value Depreciation

1 $25000 $25000 × 40% = $10,000

2 $25,000 - $10,000 = 15000 $15,000 × 40% = $6,000

3 $15,000 - $6,000 = $9,000 $9,000 × 40% = $3,600

4 $9,000 - 3,600 = $5,400 $5,400 × 40% = $2,160

5 $5,400 - $2,160 = $3,240 $1,296