Question

Oriole Company purchased machinery on January 1, 2020, for $96,000. The machinery is estimated to have a salvage value of $9,600 after a useful life of 8 years.
Required:
a. Compute 2020 depreciation expense using the straight-line method.
b. Compute 2017 depreciation expense using the double-declining-balance method, assuming the machinery was purchased on October 1, 2017.

Answer 1

Answer: See explanation

Explanation:

a. Compute 2020 depreciation expense using the straight-line method.

This will be:

= (Cost of the asset - Salvage value) / Useful life of the asset

= ($96,000 - $9600) / 8

= $86400 / 8

= $10,800

b. Compute 2017 depreciation expense using the double-declining-balance method, assuming the machinery was purchased on October 1, 2017.

This will be:

= $10,800 × 3/12

= $10800 × 0.25

= $2700