Question

Workman company purchased a machine on January 2014, for $800000. The machine has an estimated life of 5 years and a salvage value of $100,000. Depreciation was computed by 150% declining basic method. What is the amount of accumulated depreciation at the end of December 31, 2015?

Answer 1

To calculate the accumulated depreciation for the machine using the 150% declining balance method, we will need to follow a few steps:

1. **Determine the Depreciation Rate**:
The straight-line depreciation rate for an estimated life of 5 years is calculated as:

\[
\text{Straight-Line Rate} = \frac{1}{5} = 20\%
\]

The declining balance rate, using 150% of the straight-line rate, is:

\[
\text{Declining Balance Rate} = 150\% \times 20\% = 30\%
\]

2. **Calculate Depreciation for Each Year**:
We will now apply the declining balance rate to the book value of the machine at the beginning of each year.

**Year 1 (2014)**:
- Beginning Book Value: $800,000
- Depreciation Expense:

\[
\text{Depreciation} = 30\% \times 800,000 = 240,000
\]

- Ending Book Value:

\[
800,000 - 240,000 = 560,000
\]

**Year 2 (2015)**:
- Beginning Book Value: $560,000
- Depreciation Expense:

\[
\text{Depreciation} = 30\% \times 560,000 = 168,000
\]

- Ending Book Value:

\[
560,000 - 168,000 = 392,000
\]

3. **Calculate Accumulated Depreciation**:
Accumulated depreciation at the end of 2015 will be the sum of the depreciation expenses for both years.

\[
\text{Accumulated Depreciation} = 240,000 + 168,000 = 408,000
\]

Therefore, the accumulated depreciation at the end of December 31, 2015, is **$408,000**.