A company buys a piece of equipment for $56,000. The equipment has a useful life
ID: 2564217 • Letter: A
Question
A company buys a piece of equipment for $56,000. The equipment has a useful life of seven years. No residual value is expected at the end of the useful life. Using the double-declining-balance method, what is the company's depreciation expense in the first year of the equipment’s useful life? (Do not round intermediate calculations)
$8,000.
$28,000.
$16,000.
$14,000.
A company buys a piece of equipment for $56,000. The equipment has a useful life of seven years. No residual value is expected at the end of the useful life. Using the double-declining-balance method, what is the company's depreciation expense in the first year of the equipment’s useful life? (Do not round intermediate calculations)
Explanation / Answer
Cost of the equipent =$56,000
Residual value =0
Depreciable value =$56,000
Life of the equipment = 7 years
Depreciation rate under Straight Line Method (100 / 7) = 14.29%
Depreciation rate under Double Declining Method =14.29 x 2 = 28.58%
Under double declining method , the depreciation form second year onwards is calculated on the net value of the machine.
Depreciationexpense for the first year will be = 28.58% of $56,000 = $16,000
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