Answer:
$12,000
Explanation:
Given that,
Cost of equipment = $50,000
Expected useful life = 5 years
Estimated residual value = $4,000
Depreciation refers to the fall in the value of fixed assets with the passage of time.
Here, we are using double-declining-balance depreciation method,
Firstly, we are calculating the straight line depreciation rate as follows:
= (100% ÷ useful life)
= (100% ÷ 5)
= 20%
So, the double-declining depreciation rate is calculated by multiplying the straight line depreciation rate by 2. It is calculated as follows:
= 2 × straight line depreciation rate
= 2 × 20%
= 40%
First year depreciation is calculated as follows:
= Double-declining depreciation rate × Cost of equipment
= 40% × $50,000
= $20,000
Therefore, the amount of depreciation expense for the second year is calculated as follows:
= Double-declining depreciation rate × (Cost of equipment - First year depreciation)
= 40% × ($50,000 - $20,000)
= 0.4 × $30,000
= $12,000
