Pollyanna Publishing, a textbook publishing firm, purchased a new machine for $80,000. This machine is expected to operate for 1

Answer:

A.

Depreciation Expense for the first year: $14,400

For the second year’s depreciation expense: $11,520

B.

The depreciation expense for the first year is equal to the second year’s depreciation expense = $7,200

Explanation:

A.Using the straight-line method, the asset has a useful life of 10 years, meaning its annual depreciation represents 10% of the depreciable cost.

Calculating the depreciable cost results in = Total cost of the asset - salvage value =  $80,000-$8,000 = $72,000

With the double-declining-balance method, the straight-line rate of 10% is increased to 20%, which is then applied to the book value of the depreciable cost at the start of each year.

For the first year, the depreciation expense is calculated as 20% of $72,000  = $14,400

At the onset of the second year, the book value of the depreciable cost is $72,000 -$14,400 = $57,600

The depreciation expense for the second year is then 20% of $57,600  = $11,520

B.

The organization adopts straight-line depreciation, calculating Depreciation Expense for each year using the following formula:  

Depreciation Expense = (Cost of the machine − salvage value)/Useful Life = ($80,000-$8,000)/10 = $7,200

Thus, the first year’s Depreciation Expense = the same value as the second year’s depreciation expense = $7,200