On January 1, 2011, Zane Manufacturing Company purchased a machine for $40,000. The company expects to use the machine a total of 24,000 hours over the next 6 years. The estimated sales price of the machine at the end of 6 years is $4,000. The company used the machine 8,000 hours in 2011 and 12,000 in 2012.
What is depreciation expense for 2011 if the company uses double-declining balance depreciation?

Question

Quizplus · Accepted Answer

The double-declining balance depreciation method involves doubling the straight-line depreciation rate. The straight-line depreciation rate for 6 years is 1/6 (or approximately 16.67%). Doubling this gives a depreciation rate of approximately 33.33% per year. However, for the double-declining balance method, the depreciation is calculated on the book value at the beginning of the year, not the original cost. For the first year, the book value is the original cost of $40,000. Thus, the depreciation expense for 2011 is 33.33% of $40,000, which is approximately $13,333.

On January 1, 2011, Zane Manufacturing Company Purchased a Machine