Question

Fathom Company acquired a $50,000 machine on January 1, 2018. The machine is estimated to have a useful life of 5 years, and a residual value of $5,000. For units-of-production depreciation purposes, the machine is expected to produce 500,000 units. If Fathom Company uses double-declining-balance depreciation, what is the depreciation expense in 2019

Answer 1

Answer:

$12,000

Explanation:

The double-declining method records a higher depreciable amount in the first years of asset life. It uses double the rate used in the straight-line method.

Using the double-declining method, the depreciation rate for Fathom will be  40 % ({1/5 x100 } )

first-year depreciation- 2018

=40/100 x $50,000

=0.4 x 50,000

=$20,000

Book value= $50,000- $20,000= $30,000

Second-year depreciation- 2019

= 40 % x 30,000

=0.4 x $30,000

=$12,000

By using the double-declining-balance depreciation amount for year two = $12,000