On January 1, Year 1, Rainey Co. purchased a machine that cost $150,000. The equipment is estimated to have a 5-year life and a salvage value of $30,000.Required: a) Compute the amount of depreciation expense using the double-declining-balance method for: (1) Year 1 (2) Year 2b) Compute the amount of MACRS depreciation for the above equipment for Year 1 assuming the property is 5-year property and the MACRS percentage is 20%.
What will be an ideal response?
| a) | (1) $60,000 |
Double-declining-balance rate = (1 ÷ 5) × 2 = 40%
(1) Depreciation for Year 1 = Book value at beginning of year of $150,000 × 40% = $60,000
(2) Depreciation for Year 2 = Book value of ($150,000 ? $60,000) × 40% = $36,000
| b) | $30,000 |
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What will be an ideal response?