Chapter 11, Problem 11.14E

Double-declining-balance method; switch to straight line

• LO11–2, LO11–6

On January 2, 2018, the Jackson Company purchased equipment to be used in its manufacturing process. The equipment has an estimated life of eight years and an estimated residual value of $30,625. The expenditures made to acquire the asset were as follows:

Purchase price	$154,000
Freight charges	2,000
Installation charges	4,000

Jackson’s policy is to use the double-declining-balance (DDB) method of depreciation in the early years of the equipment’s life and then switch to straight line halfway through the equipment’s life.

Required:

1. Calculate depreciation for each year of the asset’s eight-year life.

2. Discuss the accounting treatment of the depreciation on the equipment.