On July 1, 2014, Nowton Co. purchased machinery for $168,000. Salvage value was estimated to be $7,000. The machinery will be depreciated over ten years using the double-declining balance method. If depreciation is computed on the basis of the nearest full month, Nowton should record depreciation expense for 2015 on this machinery of

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Quizplus · Accepted Answer

The double-declining balance method depreciates assets at twice the straight-line rate. The straight-line depreciation rate for 10 years is 10%, so the double-declining rate is 20%. For the first full year (2015), the depreciation expense is calculated on the book value at the beginning of the year. The initial book value is $168,000. For the first half of 2014 (since it's purchased on July 1), the depreciation would be $168,000 * 20% * 6/12 = $16,800, leaving a book value of $151,200 at the beginning of 2015. The depreciation for 2015 is then $151,200 * 20% = $30,240.