On 30 April 2013, Tilton Products purchased machinery for $88,000. The useful life of this machinery is estimated at 8 years, with an $8,000 residual value.
-Refer to the above data. Assume that in its financial statements, Tilton Products uses the 150%-declining-balance method and the half-year convention. Depreciation expense in 2013 and 2014 will be:

Question

Quizplus · Accepted Answer

The 150%-declining-balance method calculates depreciation by multiplying the book value by 1.5 times the straight-line rate. The straight-line rate is 1/8 (useful life), so 1.5 times that is 18.75%. For 2013, using the half-year convention, the depreciation is $88,000 * 18.75% * 0.5 = $8,250. For 2014, the book value is $88,000 - $8,250 = $79,750, and the depreciation is $79,750 * 18.75% = $14,953.

On 30 April 2013, Tilton Products Purchased Machinery for $88,000