Madison, Inc., purchased equipment at a cost of $84,000. The equipment has an es

Question

Madison, Inc., purchased equipment at a cost of $84,000. The equipment has an estimated residual value of $12,000 and an estimated life of 6 years, or 10,000 hours of operation. The equipment was purchased on January 1, 2004. During the first year of operation, it was used for 1,500 hours.

Refer to Madison, Inc.-Equipment. If Madison uses the double declining-balance depreciation method, how much is depreciation expense for 2005?

$16,000

$18,667

$24,000

$28,000

a.

$16,000

b.

$18,667

c.

$24,000

d.

$28,000

Explanation / Answer

Answer (d) $28000

Depreciation Rate= (2*(84000/6))/84000 Depreciation Rate = 28000/84000 Depreciation Rate = 33.33% Depreciation= 84000*33.33% Depreciation= 28000

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