Answer:
- Depreciation for 2021 is $6,300 with book value of the machinery being $35,700.
- For 2022, Depreciation is $7,140 with book value of $28,560.
Explanation:
The double-declining method is otherwise known as the reducing balance method and is given by the formula below:
Double declining method = 2 X SLDP X BV
SLDP = straight-line depreciation percentage
BV = Book value
SLDP is 100%/10 years = 10%, then 10% multiplied by 2 to give 20%
At Year 2021, 20% X $42,000 = $8,400/yearly
Remember, the machinery was purchased on April 1, 2021, so 9 months depreciation would be accounted for as: 9/12 x $8,400 = $6,300.
So, the book value of the machinery is $42,000 - $6,300 = $35,700 at December 31, 2021
At Year 2022, 20% X $35,700 ($42,000 - $6,300) = $7,140
So, the book value of the machinery is $35,700 - $7,140 = $28,560 at December 31, 2022
Accumulated depreciation expense for Years 2021 to 2022, under this method, is $13,440 (addition of all the yearly depreciation).
