Barnes Company purchased a machine on April 4, 20X1, for $210,000. The machine had an estimated useful life of ﬁve years and a salvage value of $30,000. The machine is being depreciated using the double-declining-balance method. Barnes depreciates its assets from the ﬁrst day of the month nearest the date of purchase. The asset balance, net of accumulated depreciation, at December 31, 20X2, would be:

Question

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The double-declining-balance method depreciates assets at twice the straight-line rate. The straight-line rate for a 5-year life is 20%, so the double-declining rate is 40%. Since depreciation starts from the nearest month of purchase, depreciation for 20X1 starts from April 1, making it 9 months of depreciation in 20X1. For 20X1, the depreciation expense is $210,000 * 40% * (9/12) = $63,000. The book value at the end of 20X1 is $210,000 - $63,000 = $147,000. For 20X2, the full year's depreciation is $147,000 * 40% = $58,800. The book value at the end of 20X2 is $147,000 - $58,800 = $88,200.

Barnes Company Purchased a Machine on April 4, 20X1, for $210,000