Weezer Company purchased equipment for $700,000 cash on January 1, 2009. The est

Question

Weezer Company purchased equipment for $700,000 cash on January 1, 2009. The estimated life is 10 years or 2,000,000 units; salvage value is estimated at $70,000.

a.What is the double-declining balance rate?

b.Complete the following table.

Year ended Depreciation Expense Accumulated Depreciation Net Book Value

12/31/2009 [ ] [ ] [ ]

12/31/2010 [ ] [ ] [ ]



c.What will be the book value of the equipment at the end of its useful life?

Explanation / Answer

Company purchased an equipment at the cost of $700,000 This equipment is estimated to have 10 year useful life. At the end of the 10th year, the salvage value (residual value) will be $70,000.. Useful life = 10years --> Straight line depreciation rate = 1/10= 10% per year 1... Depreciation rate for double declining balance method = 10% x 200% = 10% x 2 = 20% per year Depreciation for 2009 = $140,000 x 20% x 12/12 = 28000 Depreciation for 2010 = ($140,000 -28000 ) x 40% x 12/12 = ?? let y Double Declining Balance Depreciation Method Year Book Value book at the beginning Depreciation Rate Depreciation Expense Value year-end 1.2009 $700,000 20% $28,000 (*1) $672,000 2.2010 $672,000 20% $y (*2) ??

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