Question

On April 1, Cyclone Co. purchases a trencher for $280,000. The machine is expected to last five years and have a salvage value of $40,000. Exercise 8-12 Double-declining-balance, partial-year depreciation LO C2 Compute depreciation expense at December 31 for both the first year and second year assuming the company uses the double-declining-balance method. (Enter all amounts as positive values.)

Answer 1

Answer:

• Year 1 = $84,000
• Year 2 = $78,400

Explanation:

Double declining means that the asset is depreciating at double the rate that it would with straight method:

Straight line depreciation = 280,000 / 5 years

= $56,000

Rate = 56,000 / 280,000 = 20%

Double declining will be:

= 20 * 2 = 40%

Year 1 Depreciation:

= 40% * 280,000 * 9/12 months

= $84,000

Year 2 Deprecation:

= 40% * Net book value

= 40% * (280,000 - 84,000)

= $78,400