Question

Question: Ramirez Company installs a computerized manufacturing machine in its factory at the beginning of the year at a cost of \(43,500. The machine’s useful life is estimated at 10 years, or 385,000 units of product, with a \)5,000 salvage value. During its second year, the machine produces 32,500 units of product. Determine the machine’s second-year depreciation using the double-declining-balance method.

Short answer

The machine’s second-year depreciation is $8,700.

Step-by-step solution

Double-declining-Balance Method

The declining-balance method of depreciation uses a depreciation rate that is a multiple of the straight-line rate and applies it to the asset’s beginning of period book value. An accelerated depreciation method yields larger depreciation expenses in the early years of an asset’s life and less depreciation in later years.

Formula used in double-declining-method

Computation of depreciation

= 10%

= 20%

=$8,700

The machine’s second-year depreciation by double declining method is $8,700.