Chapter 11: Q8Q (page 582)

Workman Company purchased a machine on January 2, 2017, for $800,000. The machine has an estimated useful life of 5 years and a salvage value of $100,000. Depreciation was computed by the 150% declining-balance method. What is the amount of accumulated depreciation at the end of December 31, 2018?

Short Answer

Expert verified

Answer

Accumulated depreciation = $408,000

Step by step solution

Meaning of Accumulated Depreciation

Depreciation expense is an expense that is incurred on a tangible asset due to obsolescence or the passage of time on that asset. A company has a different option for determining depreciation, but straight-line depreciation is the simplest one.

Determining the amount of accumulated depreciation

Calculating depreciation rate

$\begin{array}{rcl} D e p r e c i a t i o n r a t e & = & \frac{1}{U s e f u l l i f e} \times D e p r e c i a t i o n d e c l i n i n g m e t h o d \\ = & \frac{1}{5} \times 150 % \\ = & 30 % \end{array}$

Calculating depreciation for 2017

$\begin{array}{rcl} D e p r e c i a t i o n & = & C o s t o f m a c h i n e \times D e p r e c i a t i o n r a t e \\ = & $ 800, 000 \times 30 % \\ = & $ 240, 000 \end{array}$

Calculating depreciation for 2018

$\begin{array}{rcl} D e p r e c i a t i o n & = & (C o s t o f m a c h i n e - D e p r e c i a t i o n f o r 2017) \times D e p r e c i a t i o n r a t e \\ = & ($ 800, 000 - $ 240, 000) \times 30 % \\ = & $ 560, 000 \times 30 % \\ = & $ 168, 000 \end{array}$

Calculating Accumulated depreciation for 2018

$\begin{array}{rcl} A c c u m u l a t e d d e p r e c i a t i o n & = & D e p r e c i a t i o n f o r 2017 + D e p r e c i a t i o n f o r 2018 \\ = & $ 240, 000 + $ 168, 000 \\ = & $ 408, 000 \end{array}$

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Workman Company purchased a machine on January 2, 2017, for \(800,000. The machine has an estimated useful life of 5 years and a salvage value of \)100,000. Depreciation was computed by the 150% declining-balance method. What is the amount of accumulated depreciation at the end of December 31, 2018?

Short Answer

Step by step solution

Meaning of Accumulated Depreciation

Determining the amount of accumulated depreciation

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