Question

Eckman Company purchased equipment for $80,000 on January 1, 2011, and will use the double-declining-balance method of depreciation. It is estimated that the equipment will have a 5-year life and a $4,000 salvage value at the end of its useful life. The amount of depreciation expense recognized in the year 2013 will be
a. $11,520.
b. $18,240.
c. $19,200.
d. $10,944.

Answer 1

Answer:

Depreciation Expense = $11,520

Explanation:

given data

equipment = $80,000

salvage value = $4,000

Life = 5 years

to find out

The amount of depreciation expense recognized

solution

we get first Straight line Depreciation Rate that is

Straight line Depreciation Rate = $\frac{1}{life}$   ....................1

Straight line Depreciation Rate = $\frac{1}{5}$

Straight line Depreciation Rate = 20%

and

Double declining Depreciation Rate will be

Double declining Depreciation Rate = 2 × Straight line Depreciation Rate    .....................2

Double declining Depreciation Rate = 2 × 20%  = 40%

and

Depreciation Expense during 2011  = equipment ×  Double declining Depreciation Rate    ...................3

Depreciation Expense during 2011 = $80,000 × 40%  = $32000

and  Book Value at 31st December 2011

Book Value = equipment  - Depreciation Expense    ...................4

Book Value = $80,000 - $32,000

Book Value = $48,000

as that Depreciation Expense during 2012 will be

Depreciation Expense = Book Value × Double declining Depreciation Rate .....................5

Depreciation Expense = $48,000 × 40%

Depreciation Expense = $19,200

and Book Value at 31st December 2012

Book Value = Book Value 2011 - Depreciation Expense      ................6

Book Value = $48,000 - $19,200

Book Value= $28,800

and Depreciation Expense during 2013  will be

Depreciation Expense = Book Value × Double declining Depreciation Rate   ................7

Depreciation Expense = $28,800 × 40%

Depreciation Expense = $11,520