Question

Bay Back Company acquired equipment on June 30, 2016, for $210,000. The residual value is $35,000 and the estimated life is 5 years or 40,000 hours. Compute the balance in Accumulated Depreciation as of December 31, 2018, if Bay Back Company uses the double-declining-balance method of depreciation.
A) $68,040
B) $134,400
C) $141,960
D) $40,320
E) None of the above

Answer 1

Answer:

E) None of the above

Explanation:

The computation of the Accumulated Depreciation under the ouble-declining-balance method  is shown below:

First we have to find the depreciation rate which is shown below:

= One ÷ useful life

= 1 ÷ 5

= 20%

Now the rate is double So, 40%

In year 2016, the original cost is $210,000, so the depreciation is $42,000 after applying the 40% depreciation rate  and six month also

And, in year 2017, the depreciation would be $67,200 ($210,000 - $42,000) × 40%

And in year 2018,  the depreciation would be $40,320 ($210,000 - $42,000 - $67,200) × 40%

So, the total accumulated depreciation would be

= $42,000 + $67,200 + $40,320

= $149,520