Question

Schager Company purchased a computer system on January 1, 2019, at a cash cost of $25,000. The estimated useful life is 10 years, and the estimated residual value is $3,000. The company will use the double declining-balance depreciation method. How much is the 2020 depreciation expense? $5,000. $4,120. $4,000. $3,520.

Answer 1

Answer:

Annual depreciation 2020= $3,520

Explanation:

Giving the following information:

Purchase price= $25,000

Useful life= 10 years

Salvage value= $3,000

To calculate the annual depreciation for 2020 under the double-declining balance, we need to use the following formula:

Annual depreciation= 2*[(book value)/estimated life (years)]

2019:

Annual depreciation= 2*[(25,000 - 3,000) / 10]

Annual depreciation= $4,400

2020:

Annual depreciation= 2*[(22,000 - 4,400) / 10]

Annual depreciation= $3,520