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Veronika [31]
3 years ago
13

Depreciation Methods Vorst Corporation's schedule of depreciable assets at December 31, 2016, was as follows: Asset Cost Accumul

ated Depreciation Acquisition Date Residual Value A $100,000 $ 64,000 2015 $20,000 B 55,000 36,000 2014 10,000 C 70,000 33,600 2014 14,000 $225,000 $133,600 $44,000 Vorst takes a full year's depreciation expense in the year of an asset's acquisition and no depreciation expense in the year of an asset's disposition. The estimated useful life of each depreciable asset is 5 years. Vorst depreciates Asset A on the double-declining-balance method. How much depreciation expense should Vorst record in 2017 for Asset A? a. $6,400 b. $32,000 c. $14,400 d. $25,600
Business
1 answer:
lions [1.4K]3 years ago
6 0

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.

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Answer:

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Answer:

Today, the investment is worth $31,997.29

Explanation:

Giving the following information:

An investment offers $5,900 per year for 15 years, with the first payment occurring one year from now. The required return is 6 percent

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