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Mekhanik [1.2K]
4 years ago
14

Voltage industries, a calendar-year company, purchases equipment for $85,000 on january 2nd, 2017. the equipment's expected usef

ul life is five years, and the expected salvage value of the equipment is $5,000. what is the book value of the equipment on december 31st, 2018, if voltage uses the double-declining-balance method?
a.$34,000
b.$51,000
c.$54,400
d.$30,600
Business
1 answer:
stich3 [128]4 years ago
3 0
Double-declining-balance rate:

By straight-line method, annual depreciation expenses  = (85,000-5,000)/5 = $16,000

Rate of depreciation = 16000/(85,000-5,000) = 0.2 = 20%

Then, double-declining-balance rate = 2*Straight-line rate = 2*20 = 40%

From 2nd January 2017 to 31st December 2018 can be approximated as 1 year.
Therefore,
Depreciation expense in yr 1 = 40/100 * 85,000 = $34,000

And,
Book value at December 31 2018 = $85,000 - $34,000 = $51,000

It can be seen that the correct answer is b.
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