On January 1, 2010, Mirage Company purchased a new machine for $1,400,000.The new machine has an estimated useful life of nine years and the residual value was estimated to be $50,000.Depreciation was calculated on the double declining-balance method.What amount should be shown in Storey's balance sheet at December 31, 2011, net of accumulated depreciation, for this machine?

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Quizplus · Accepted Answer

The double declining-balance method calculates depreciation by doubling the straight-line rate. The straight-line rate is 1/9, so the double rate is 2/9. For 2010, depreciation is $1,400,000 * 2/9 = $311,111. For 2011, depreciation is ($1,400,000 - $311,111) * 2/9 = $244,444. The net book value at the end of 2011 is $1,400,000 - $311,111 - $244,444 = $846,914.

On January 1, 2010, Mirage Company Purchased a New Machine