On September 19, 2010, Nara Co.purchased machinery for $285,000.Residual value was estimated to be $15,000.The machinery will be amortized over eight years using the double declining-balance method.If depreciation is calculated on the basis of the nearest full month, Trane should record depreciation expense for 2011 on this machinery of

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Quizplus · Accepted Answer

The double-declining-balance method multiplies the book value at the beginning of the year by 2 times the straight-line rate (1/8 or 12.5%).  The book value at the beginning of 2011 is $285,000 - $66,797 = $218,203.  Thus, depreciation expense for 2011 is $218,203 x 25% = $54,551.  Since depreciation is calculated on the basis of the nearest full month, depreciation expense for 2011 is $54,551 x 11/12 = $53,125.