Minor Company installs a machine in its factory at the beginning of the year at a cost of $135,000. The machine's useful life is estimated to be 5 years, or 300,000 units of product, with a $15,000 salvage value. During its first year, the machine produces 64,500 units of product.
-Determine the machines' first year depreciation under the double-declining-balance method.

Question

Minor Company installs a machine in its factory at the beginning of the year at a cost of $135,000. The machine's useful life is estimated to be 5 years, or 300,000 units of product, with a $15,000 salvage value. During its first year, the machine produces 64,500 units of product. 
-Determine the machines' first 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%. Double that rate is 40%. Depreciation for the first year is 40% of $135,000, which equals $54,000.

Minor Company Installs a Machine in Its Factory at the Beginning