Answer:
c. $14,400
Explanation:
Double declining depreciation method can be described as an accelerated depreciation technique which charges depreciation expense faster than the straight-line depreciation method, because double declining method obtains its depreciation rate by multiplying the rate of straight-line depreciation method by 2.
From the Vorst Corporation's schedule of appreciable assets at December 31, 2016, the following data are obtained for Asset A:
Cost = $100,000
Accumulated Depreciation = $64,000
Acquisition Date = 2015
Residual value = $20,000
Estimated useful life = 5 years
Therefore, we have:
Straight line method depreciation rate = 1 / Estimated useful life = 0.20, or 20%
Double declining depreciation rate = Straight line method depreciation rate * 2 = 40%
Beginning book value in 2017 = Cost - Accumulated Depreciation = $100,000 - $64,000 = $36,000
Depreciation expense for 2017 = Beginning book value in 2017 * Double declining depreciation rate = $36,000 * 40% = $14,400.
Therefore, Vorst should record $14,400 as depreciation expenses in 2017 for Asset A.
Important End Note:
Under the double declining depreciation method, residual is adjusted for in the last year of the estimated useful life of the asset.
Based on the information for Asset A, its last useful year is 2019 and that is why the residual value is not adjusted for in 2017 above.
