A printing machine that has an estimated useful life of 5 years and an initial value of $150,000 (with no salvage value) had to be depreciated. At the end of the first year, using the straight-line method of depreciation, the amount of depreciation allowed was $30,000.00, and when the sum-of-the-years'-digits method was used the depreciation was $50,000. Determine the amount of depreciation that would be allowed for the first year if the printing machine were depreciated by the double declining-balance method. Which of these three methods would result in the largest depreciation of the printing machine at the end of its first year of use?
A) $50,000.00
Sum Of The Years'-Digits Method
B) $90,000.00
Double Declining-Balance Method
C) $50,000.00
Double Declining-Balance Method
D) $90,000.00
Sum Of The Years'-Digits Method

Question

A printing machine that has an estimated useful life of 5 years and an initial value of $150,000 (with no salvage value) had to be depreciated. At the end of the first year, using the straight-line method of depreciation, the amount of depreciation allowed was $30,000.00, and when the sum-of-the-years'-digits method was used the depreciation was $50,000. Determine the amount of depreciation that would be allowed for the first year if the printing machine were depreciated by the double declining-balance method. Which of these three methods would result in the largest depreciation of the printing machine at the end of its first year of use? ​
A) $50,000.00
Sum Of The Years'-Digits Method
B) $90,000.00
Double Declining-Balance Method
C) $50,000.00
Double Declining-Balance Method
D) $90,000.00
Sum Of The Years'-Digits Method

Quizplus · Accepted Answer

The double declining-balance method would result in the largest depreciation of the printing machine at the end of its first year of use, as it is an accelerated depreciation method. To calculate the depreciation under this method, we first need to find the depreciation rate, which is twice the straight-line rate. Straight-line rate = 1/5 = 0.2 or 20%. Double declining-balance rate = 20% x 2 = 40%. 
Year 1 depreciation = $150,000 x 40% = $60,000. Therefore, the answer is choice B: $90,000.00 for the Sum Of The Years'-Digits Method and $50,000.00 for the straight-line method.

A Printing Machine That Has an Estimated Useful Life of 5