Question

On the first day of its fiscal year, Scooter Co. purchased a computer system for a total cost of $50,000. The computer system is expected to have a useful life of 5 years with a residual value of $5,000. If the company uses the double-declining-balance method, its depreciation expense for the computer system in the first year will be:

Answer 1

Answer:

$20000

Explanation:

Given: Total cost of computer system= $50000.

           Residual value= $5000.

           Useful life= 5 years.

Now, calculating depreciation expense as per double-declining balance method.

$Depreciation\ expense= (cost- Accumlated\ depreciation)\times \frac{2}{useful\ life}$

⇒ $Depreciation\ expense= (\ 50000- \ 0)\times \frac{2}{5}$

⇒ $Depreciation\ expense= \ 50000\times \frac{2}{5}$

∴ $Depreciation\ expense= \ 20000$

Hence, $20000 is the depreciation expense for first year as per double-declining balance method.