On January 1, 2017, Real Planes Manufacturing Corporation purchased a machine for $40,000,000
The corporation expects to use the machine for 24,000 hours over the next six years. The estimated residual value of the machine at the end of the sixth year is $40,000. The corporation used the machine for 3,600 hours in 2017 and 5,000 hours in 2018. What is the book value of the machine at the end of year 2018 if the corporation uses double-declining-balance method of depreciation? (Round your intermediate calculations.)
What will be an ideal response
Double-declining-balance depreciation = (Cost - Accumulated depreciation) x 2 x (1 / Useful life)
Depreciation for the year 2017 = $40,000,000 (Cost of asset) x 2 x 1/6 = $13,333,333
Depreciation for the year 2018 = ($40,000,000 - $13,333,333 ) x 2 x 1/6 = $8,888,889
Book value of the machine at the end of year 2018 = $40,000,000 - $13,333,333 - $8,888,889 = $17,777,778.
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