Asked by Angie Rivera on Jul 08, 2024
Verified
Kingston Company purchased a piece of equipment on January 1 2016. The equipment cost $200000 and had an estimated life of 8 years and a salvage value of $25000. What was the depreciation expense for the asset for 2017 under the double-declining-balance method?
A) $21667.
B) $37500.
C) $50000.
D) $39063.
Double-Declining-Balance Method
A method of accelerated depreciation which computes depreciation expense by doubling the straight-line rate and applying it to the book value of the asset at the beginning of each year.
Depreciation Expense
Depreciation expense is the allocation of the cost of a tangible asset over its useful life, reflecting wear and tear, decay, or decrease in value.
Salvage Value
The estimated resale value of an asset at the end of its useful life, typically considered in depreciation calculations.
- Calculate depreciation expense using different methods: straight-line, double-declining-balance, and units-of-activity.
Verified Answer
JD
Julio DuenasJul 12, 2024
Final Answer :
B
Explanation :
The double-declining-balance method of depreciation involves doubling the straight-line rate of depreciation. The straight-line rate for an asset with a useful life of 8 years is 1/8 (or 12.5%) annually. Doubling this rate gives a depreciation rate of 25% per year under the double-declining-balance method. For the first year (2016), the depreciation expense is 25% of the initial cost ($200,000), which is $50,000. This reduces the book value of the asset to $150,000 ($200,000 - $50,000) at the beginning of 2017. For 2017, the depreciation expense is 25% of $150,000, which equals $37,500.
Learning Objectives
- Calculate depreciation expense using different methods: straight-line, double-declining-balance, and units-of-activity.