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}$

Unlock Step-by-Step Solutions & Ace Your Exams!

Full Textbook Solutions
Get detailed explanations and key concepts
Unlimited Al creation
Al flashcards, explanations, exams and more...
Ads-free access
To over 500 millions flashcards
Money-back guarantee
We refund you if you fail your exam.

Start your free trial

Over 30 million students worldwide already upgrade their learning with Vaia!

Recommended explanations on Business Studies Textbooks

View all explanations

What do you think about this solution?

We value your feedback to improve our textbook solutions.

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

One App. One Place for Learning.

Most popular questions from this chapter

Recommended explanations on Business Studies Textbooks

Influences On Business

Business Development

Financial Performance

Introduction to Business

Intermediate Accounting

Organizational Behavior

Study anywhere. Anytime. Across all devices.