Wickland Company installs a manufacturing machine in its production facility at the beginning of the year at a cost of $87,000. The machine's useful life is estimated to be 5 years, or 400,000 units of product, with a $7,000 salvage value. During its second year, the machine produces 84,500 units of product.
-Determine the machines' second year depreciation under the double-declining-balance method.

Question

Wickland Company installs a manufacturing machine in its production facility at the beginning of the year at a cost of $87,000. The machine's useful life is estimated to be 5 years, or 400,000 units of product, with a $7,000 salvage value. During its second year, the machine produces 84,500 units of product. 
-Determine the machines' second year depreciation under the double-declining-balance method.

Quizplus · Accepted Answer

The double-declining-balance method calculates depreciation by doubling the straight-line rate. The straight-line rate is 1/5 = 20%, so the double rate is 40%. First-year depreciation is $87,000 * 40% = $34,800. The book value at the start of the second year is $87,000 - $34,800 = $52,200. Second-year depreciation is $52,200 * 40% = $20,880.

Wickland Company Installs a Manufacturing Machine in Its Production Facility