PPE & Depreciation question

Question

Parker Industries purchased a new super-computer on Jan 1, 2012 for $400,000. The company estimated that the machine will have a $50,000 salvage value at the end of its 10-year useful service life.

Prepare depreciation schedule that shows the annual depreciation expense on the super-computer for its 10-year life assuming:

(1) The company uses straight-line depreciation method
(2) The company uses double-declining-balance depreciation method

Answer 1

Staright decline depreciation method

 

total depreciation = 400,000 - 50,000 = 350,000

per year depreciation = 350,000/10 = 35,000 which is 10% of 350,000

 

So every year subtract $35,000 for ten years and prepare depreciation schedule

 

Double decline balance depreciation method

 

Every year deduct doubel the percentage of total depreciation i.e. 20% of rmaining depreciation

 

1st year depreciation = 20/100 of 350,000 = 70,000

2nd year = 20/100(350,000 - 70,000) = 56,000 

3rd year = 20/100( 350,000-70,000-56,000) = 44,800

 

so on and so forth

 

:)