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Contemporary Mathematics for Busin...

8th Edition
Robert Brechner + 1 other
ISBN: 9781305585447

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BuyFindarrow_forward

Contemporary Mathematics for Busin...

8th Edition
Robert Brechner + 1 other
ISBN: 9781305585447
Textbook Problem

Award Makers bought a computerized engraving machine for $33,800. It is expected to have a 5-year useful life and a trade-in value of $2,700. Prepare a depreciation schedule for the first three years by using the 150% declining-balance method for the machine.

Award Makers

150% Declining-Balance Depreciation Schedule Computerized Engraving Machine

End of Beginning Depreciation Depreciation Accumulated Ending
Year Book Value Rate for the Year Depreciation Book Value
1
2
3

To determine

To calculate: The depreciation schedule for Award Maker’s machine using 150% declining balance method when the total cost of machine is $33,800.

Explanation

Given Information:

The total cost of machine is $33,800 and expected to have useful life of 5 years. The trade-in value of machine is $2,700.

Formula used:

The steps to prepare depreciation schedule by the declining balance method are as follows:

Step 1: Calculate the declining balance rate by the below formula

Decliningbalance rate=1Useful life×Multiple

Step 2: Calculate the depreciation for each year by multiplying beginning book value by declining balance rate.

Step 3: Calculate the ending book value by subtracting depreciation of the year from the beginning book value.

Step 3: The depreciation is complete when the ending book value equals the salvage value.

Step 4: Prepare the depreciation schedule in form of chart.

Calculation:

Consider the total cost of machine is $33,800. The trade-in value of machine is $2,700 and expected to have useful life of 5 years.

The declining-balance rate is:

Decliningbalance rate=1Useful life×Multiple

Now, using the above formula, the declining-balance rate is:

Decliningbalance rate=15×150%=15×1.5=0.3

The depreciation for the year is:

The depreciation for the year=Beginning book value×Decliningbalance rate

Now, using the above formula, the depreciation for 1st year is:

The depreciation for year 1=33,800×0.3=$10,140

The ending book value is:

Ending book value=Beginning book valueDepreciation for year 1

Now, using the above formula, the ending book value for 1st year is:

Ending book value=33,80010,140=$23,660

Now, using the above formula, the depreciation for 2nd year is:

The depreciation for year 2=23,660×0

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