### Depreciation Calculation Using Double-Declining-Balance MethodA machine costing $89,375 with a 5-year life and $5,400 residual value was purchased on January 2. Compute depreciation for each of the five years, using the double-declining-balance method.#### Depreciation Schedule| Year | Depreciation ||---------|--------------|| Year 1 | $ || Year 2 | $ || Year 3 | $ || Year 4 | $ || Year 5 | $ |### Explanation**Double-Declining-Balance (DDB) Method**: This is an accelerated depreciation method. It doubles the rate at which you depreciate your asset compared to the straight-line method. **Steps**:1. Determine the straight-line depreciation rate by dividing 1 by the number of years in the asset's useful life (e.g., for 5 years, it's 1/5 = 20% per year).2. Double the straight-line depreciation rate (20% x 2 = 40%).3. Apply this double-declining rate to the book value of the asset at the beginning of each year.Calculate depreciation while considering the residual value by stopping depreciation when the book value reaches the residual value or the end of the useful life.**Example**:1. **Year 1**: - Beginning Book Value: $89,375 - Depreciation Expense: $89,375 x 40% = $35,750 - Ending Book Value: $89,375 - $35,750 = $53,6252. **Year 2**: - Beginning Book Value: $53,625 - Depreciation Expense: $53,625 x 40% = $21,450 - Ending Book Value: $53,625 - $21,450 = $32,1753. **Year 3**: - Beginning Book Value: $32,175 - Depreciation Expense: $32,175 x 40% = $12,870 - Ending Book Value: $32,175 - $12,870 = $19,3054. **Year 4**: - Beginning Book Value: $19,305 - Depreciation Expense: $19,305

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Description: ### Depreciation Calculation Using Double-Declining-Balance MethodA machine costing $89,375 with a 5-year life and $5,400 residual value was purchased on January 2. Compute depreciation for each of the five years, using the double-declining-balance

Solution: Cost of machine $89,375 Residual value $5,400 Useful life (in years) 5 years…

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A machine costing $89,375 with a 5-year life and $5,400 residual value was purchased January 2. Compute depreciation for each of the five years, using the double-declining-balance method.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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