Can you help me fill in the blanks Freedom Co purchased a ne

Can you help me fill in the blanks

Freedom Co. purchased a new machine on July 2, 2016, at a total installed cost of $44,000. The machine has an estimated life of five years and an estimated salvage value of $6,700.

Required:

a-1. Calculate the depreciation expense for each year of the asset\'s life using Straight-line depreciation.

a-2. Calculate the depreciation expense for each year of the asset\'s life using Double-declining-balance depreciation.

b. How much depreciation expense should be recorded by Freedom Co. for its fiscal year ended December 31, 2016, under each method? (Note: The machine will have been used for one-half of its first year of life.)

c. Calculate the accumulated depreciation and net book value of the machine at December 31, 2017, under each method.

Solution

Answer a - 1)

Depreciation expense under straight-line method =(Cost - salvage value) / estimated life = ($44,000 - $6,700) / 5 = $7,640

Answer a - 2 )

Depreciation expense under double-declining-balance method

= SLM rate * 2 * Book value at the beginning of the year

where SLM rate = 1 / estimated life = 1 /5 = 20 %

^*Note - Under double-declining-balance method Depreciation ceases when the net book value = salvage value . Thus in year 4 beginning , the Net book value = $9,504 [$44,000 - $17,600 -  $10,560 - $6,336 ] . we shall not apply 40 % on that as the resulant net book value will fall below the salvage value ie $6,700 . thus maximum deprecation allowed in 4th year is $2,804.

Answer b

Depreciation expense for its fiscal year ended December 31, 2016.

Answer c

Accumulated Depreciation as on December 31, 2017

( 1.5 years since purchase)

Net Book Value

as on December 31, 2017

For 2016 = $8,800 For 2017 = $8,800 + ($10,560 / 2) = $5,280

Total = ($8,800 +$5,280 ) = $14,080

($44,000- $14,080)

= $29,920