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13 April, 23:19

Culver Corporation purchased machinery on January 1, 2022, at a cost of $288,000. The estimated useful life of the machinery is 4 years, with an estimated salvage value at the end of that period of $33,800. The company is considering different depreciation methods that could be used for financial reporting purposes.

Required:

Prepare separate depreciation schedules for the machinery using the straight-line method, and the declining-balance method using double the straight-line rate.

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  1. 14 April, 03:17
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    Instructions are below.

    Explanation:

    Giving the following information:

    Purchasing price = $288,000

    Useful life = 4 years

    Salvage value = $33,800

    First, we will calculate the depreciation expense using the straight-line method:

    Annual depreciation = (original cost - salvage value) / estimated life (years)

    Annual depreciation = (288,000 - 33,800) / 4

    Annual depreciation = $63,550

    Now, using the double-declining balance:

    Annual depreciation = 2*[ (book value) / estimated life (years) ]

    Year 1 = 2*63,550 = 127,100

    Year 2 = [ (254,200 - 127,100) / 4]*2 = $63,550

    Year 3 = [ (127,100 - 63,550) / 4]*2 = $31,775

    Year 4 = [ (63,550 - 31,775) / ]*2 = $15,887.5
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