On january 1, 2016, knapp corporation acquired machinery at a cost of $1,250,000. knapp adopted the double-declining balance method of depreciation for this machinery and had been recording depreciation over an estimated useful life of ten years, with no residual value. at the beginning of 2019, a decision was made to change to the straight-line method of depreciation for the machinery. the depreciation expense for 2019 would be

Question

Averie Andrews

Business

7 January, 11:55

On january 1, 2016, knapp corporation acquired machinery at a cost of $1,250,000. knapp adopted the double-declining balance method of depreciation for this machinery and had been recording depreciation over an estimated useful life of ten years, with no residual value. at the beginning of 2019, a decision was made to change to the straight-line method of depreciation for the machinery. the depreciation expense for 2019 would be

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Judith French · Answer 1

Cost on January 1 2016 = $1,250,000

Life = 10 years

Therefore,

Double-declining depreciation rate = 2 * (1,250,000/10) / 1,250,000 = 2*0.1 = 2*10% = 20%

Book value at end of 2016 = 1,250,000 - (1,250,000*20/100) = $1,000,000

Book value at end of 2017 = 1,000,000 - (1,000,000*20/100) = $800,000

Book value at end of 2018 = 800,000 - (800,000*20/100) = $640,000

Changing to straight line depreciation:

Life remaining = 7 years

Book value = $640,000

Depreciation expense per year = 640,000/7 = $91,428.57

Therefore, depreciation expense for 2019 = $91,428.57