Martin Company purchases a machine at the beginning of the y

Martin Company purchases a machine at the beginning of the year at a cost of $160,000. The machine is depreciated using the double-declining-balance method. The machine\'s useful life is estimated to be 4 years with a $13,300 salvage value. The machine\'s book value at the end of year 3 is: Multiple Choice $80,000. $120,000. $140,000. $20,000 $18,325.

Solution

Martin Company Double Declining Method Cost of Machine $                      160,000.00 Salvage Value $                        13,300.00 Useful life 4 Ddouble Declining Rate=(100%/4)*200% 50% Depreciation Expense WDV Year 1 $160000*50%=$80000 $160000-$80000=$80000 Year 2 $80000*50%=$40000 $80000-$40000=$40000 Year 3 $40000*50%=$20000 $40000-$20000=$20000 Ans) Using Double declining Method of Depreciation ,the machine book value at the end of year 3 is $20000 Equipment Cost $                        18,250.00 Salvage Value $                           4,600.00 Useful life 6 Formula for Straight Line Depreciation (Cost-Salvage Value/Useful life) ($18250-$4600)/6 2275 Depreciation Expense (from Year 1 to Year 3) $                           2,275.00 Depreciation Expense for 3 Years=($2275*3) $                           6,825.00 Formula for calculating depreciable cost of remaining useful life=((Cost-Depreciation already charged)-Change Salvage Value)/Remaining Useful life Remaing Depreciable cost=($18250-$6825-$1825) $                           9,600.00 Depreciation from 3 Year to 6 Years=($9600/3) $                           3,200.00 Depreciation to be charged against the equipment during each of the remaining years of its ueful life is $3200