Martin Company purchases a machine at the beginning of the year at a cost of $60,000. The machine is depreciated using the double-declining-balance method. The machine's useful life is estimated to be 4 years with a $5,000 salvage value.
-Depreciation expense in year 4 is:

Question

Martin Company purchases a machine at the beginning of the year at a cost of $60,000. The machine is depreciated using the double-declining-balance method. The machine's useful life is estimated to be 4 years with a $5,000 salvage value. 
-Depreciation expense in year 4 is:

Quizplus · Accepted Answer

In the double-declining-balance method, the depreciation rate is double the straight-line rate. The straight-line rate is 1/4 or 25%, so the double rate is 50%. Year 1 depreciation is $30,000 (50% of $60,000), Year 2 is $15,000 (50% of $30,000), Year 3 is $7,500 (50% of $15,000). In Year 4, the book value is $7,500, but it cannot be depreciated below the salvage value of $5,000, so the depreciation expense is $2,500.

Martin Company Purchases a Machine at the Beginning of the Year