Fresh Co. purchased a new machine on July 2, 2019, at a total installed cost of...
Fresh Co. purchased a new machine on July 2, 2019, at a total
installed cost of $41,000. The machine has an estimated life of
five years and an estimated salvage value of $6,600.
Required:
- Calculate the depreciation expense for each year of the
asset's life using:
- Straight-line depreciation.
- Double-declining-balance depreciation.
- How much depreciation expense should be recorded by Fresh Co. for its fiscal year ended December 31, 2019, under each method? (Note: The machine will have been used for one-half of its first year of life.)
- Calculate the accumulated depreciation and net book value of the machine at December 31, 2020, under each method.
Homework Answers
a) Depreciation expense 2019
| Straight line | Double decline | |
| Depreciation expense | (41000-6600/5)*6/12 = 3440 | 41000*40%*6/12 = 8200 |
b) Calculate following
| Straight line | Double decline | |||
| Accumulated depreciation | Net book value | Accumulated depreciation | Net book value | |
| 2020 | 3440*3 = 10320 | 41000-10320 = 30680 | 41000*60%*40%*6/12+16400 = 21320 | 41000-21320 = 19680 |
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