Ramirez Company installs a computerized manufacturing machin

Ramirez Company installs a computerized manufacturing machine in its factory at the beginning of the year at a cost of $80,600. The machine\'s useful life is estimated at 10 years, or 388,000 units of product, with a $3,000 salvage value. During its second year, the machine produces 32,800 units of product Exercise 8-6 Double-declining-balance depreciation LO P1 etermine the machine\'s second-year depreciation using the double-declining-balance method. Double-declining-balance Depreciation Choose Factor(%) -| Annual Depreciation Expense Choose Factors: Depreciation expense First year\'s depreciation Second year\'s depreciation

Solution

Double declining balance depreciation expense is the twice of straight line method of deprecition expense. So in the above question the percentage of straight line method of depreciation 10% as the useful life of the machine is 10 years. so the depreciation percentage in double declining balance method is 20%(i.e, 2*10%)

1st year depreciation under double declining balance method = Cost of the machine*Percentage of depreciation = 80600*20% =16120

2nd year depreciation under double declining balance method = (80600-16120)*20% = 12896

Annual depreciation under straight line method =  (Cost of the Trencher-Salvage value)/Useful life of the machine = (282000-41000)/5 = 48200

Depreciation expense for the year ending december 2016 = 48200*9/12 = 36150

Depreciation expense for the year ending december 2017 = 48200