[Anonymous]

Please help me understand why the answer is not $20K.

Rye C. purchased a machine with a 4-year estimated useful life and an estimated 10% salvage value for $80,000 on January 1, 20X0. In its income statement, what would Rye report as the depreciation expense for 20X2 using the double-declining method?

$9,000
$10,000
$18,000
$20,000

I'm tired of operating in fear and mediocrity. It's time to try. It's time to do. It's time to go.

[rj2017]

It's not 20,000 because it's asking about 20X2, which the depreciation is $10,000. You have to account for 3 years of depreciation 20X0, 20X1, and 20X2.

2 x 1/4 = 50% depreciation every year.

20X0: Dep exp = 80,000 x 50% = 40,000
20X0: Carry Value = 80,000 – 40,000 = 40,000

20X1: dep exp = 40,000 x 50% = 20,000
20X1: Carry value = 40,000 – 20,000 = 20,000

20X2: dep exp = 20,000 x 50% = 10,000
20X2: Carry value = 20,000 – 10,000 = 10,000

20X3: dep exp = 2,000 (can't go below the salvage value of 8,000)
20X3: Carry value = 8,000 (salvage value)

Hopefully this clears it up for you!

[Anonymous]

Thank you, rj2017. I think I messed up the years because this is what I did…

YR Exp Accum. Depr. Book Value
0 $80,000
1 .50*80k $40,000 $40,000 $40,000
2 .50*40k $20,000 $60,000 $20,000
3 .50*20k $10,000 $70,000 $10,000
4 $2,000 $72,000 $8,000

I'm tired of operating in fear and mediocrity. It's time to try. It's time to do. It's time to go.

[rj2017]

Yeah you had all the right calculations but you just forgot to take into consideration the full 20X0 year. These questions are tricky, you really need to pay attention to the dates.

[Anonymous]

Yes, they sure are. Thanks again for the assist.

I'm tired of operating in fear and mediocrity. It's time to try. It's time to do. It's time to go.

[Author]

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