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# Use Double-Decling-Balance Method to Depreciate a Machine

1. On January 2, 2008, Sahara, Inc. purchased a silkscreen machine for its new clothing line. Sahara incurred the following costs related to the machine:

Purchase price .............................................................. \$120,000
Freight charges for delivery from manufacturer to Sahara ....... \$ 5,000
Installation costs ............................................................ \$ 8,000
Cost of testing machine to ensure proper installation ......\$ 4,000

This machine is estimated to have a ten (10) year useful life with a salvage value of \$18,000. Sahara will use the double-declining-balance (DDB) method to depreciate this machine.

Part 1: In the space below, calculate and record the depreciation expense on this bottling machine for 2009. Show and label your calculations.

Date Debit Credit
1.
2.
3.
4.

Part 2: Assume it is now August 1, 2010 and Sahara decides to exchange this machine for a newer model. This exchange will cost Sahara a total of \$40,000. The fair value of the old machine is \$70,000. In the space below, prepare the journal entry to record this exchange. Show and label your calculations.

Date Debit Credit
1.
2.
3.
4.
5.
6.
7.

#### Solution Preview

1. On January 2, 2008, Sahara, Inc. purchased a silkscreen machine for its new clothing line. Sahara incurred the following costs related to the machine:

Purchase price .............................................................. \$120,000
Freight charges for delivery from manufacturer to Sahara ............. \$ 5,000
Installation costs ............................................................ \$ 8,000
Cost of testing machine operation to ensure proper installation ........\$ 4,000

This machine is estimated to have a ten (10) year useful life with a salvage value of \$18,000. Sahara will use the double-declining-balance (DDB) method to depreciate this machine.

Part ...

#### Solution Summary

The solution examines double-declining-balance method to depreciate a machine. The calculations are shown.

\$2.19