Question

On January 1, year 1, Mark Corp. purchases equipment for $300,000. The equipment has a 10-year life and a $50,000 residual value. Mark uses the double-declining-balance method of depreciation. What is depreciation expense for year 1?

Answer 1

Answer:

$60,000

Explanation:

Given:

Purchase Price = $300,000

Estimated Life = 10 Year

Residual Value = $50,000

Method = Double-Declining-balance

Computation:

Rate of Depreciation = [(Price - Residual value) / Estimated year] / (Price - Residual value)

= [($300,000 - $50,000) / 10] / ($300,000 - $50,000)

= $25,000 / $250,000

= 0.1 or 10%

Under Double-Declining-balance rate = 10% x 2 = 20%

Depreciation = Purchase price x deprecation rate

                      = $300,000 x 20%

                      = $60,000