Question

Sarita Company installs a computerized manufacturing machine in its factory at the beginning of the year at a cost of $67,000. The machine's useful life is estimated at 10 years, or 420,000 units of product, with a $4,000 salvage value. During its second year, the machine produces 29,900 units of product. Required: Determine the machine's second-year depreciation using the double-declining-balance method. (Omit the "$" sign in your response.)

Answer 1

Answer:

$10,720

Explanation:

Data provided in the question:

Cost of the machine = $67,000

Useful life = 10 years

Salvage value = 10 years

Now,

Using the double declining balance method

Rate of annual depreciation = 2 × [ 1 ÷ Useful life]

= 2 × [ 1 ÷ 10 ]

= 0.20

Therefore,

Depreciation for the first year = Rate of depreciation × Cost of the machine

= 0.20 × $67,000

= $13,400

Thus,

Book value for the second year = Cost - Depreciation for the first year

= $67,000 - $13,400

= $53,600

Therefore,

Depreciation for the Second year

= Rate of depreciation × Book value for the second year

= 0.20 × $53,600

= $10,720