Question

Cutter Enterprises purchased equipment for $72,000 on January 1, 2021. The equipment is expected to have a five-year life and a residual value of $6,000. Using the double-declining-balance method, the book value at December 31, 2022, would be: ___.

Answer 1

Answer:

$19,200

Explanation:

Given

Cost of equipment =  $72,000 Date of purchase = January 1, 2021.

Useful period =  5 years

Residual value = $6,000

Annual depreciation using straight line method

= ($72,000 - $6,000)/5

= $66,000/5

= $13,200

Annual depreciation using the double declining method

= $13,200 * 2

= $26,400

By December 31, 2022, 2 years depreciation would have been computed on the asset, hence

Book value at December 31, 2022 =  $72,000 - 2($26,400)

                   = $72,000 - $52,800

                   = $19,200