Chapter 6, Problem 6.13E

Exercise 6.13

LO 3

Depreciation calculation methods Millco, Inc., acquired a machine that cost $1,200,000 early in 2016. The machine is expected to last for eight years, and its estimated salvage value at the end of its life is $180,000.

Required:

a. Using straight-line depreciation, calculate the depreciation expense to be recognized in the first year of the machine’s life and calculate the accumulated depreciation after the fifth year of the machine’s life.

b. Using declining-balance depreciation at twice the straight-line rate, calculate the depreciation expense for the third year of the machine’s life.

c. What will be the net book value of the machine at the end of its eighth year of use before it is disposed of, under each depreciation method?