Question

On April 30, 2019, Macy Products purchased machinery for $132,000. The useful life of this machinery is estimated at 5 years, with a $32,000 residual value. The company uses the double-declining-balance method. Depreciation expense for the fiscal year ending on December 31, 2020 will be:

Answer 1

Answer:

$38,720

Explanation:

Depreciation Expense = 2 x SLDP X BVSLDP

where,

SLDP = 100 ÷ number of useful life

          = 100 ÷ 5

          = 20 %

2019

Annual Depreciation Expense = 2 x 20 % x $132,000

                                                    = $52,800

But, depreciation expired for only 8 months from April 30, 2019 to December 31, 2019 during the year, therefore

Depreciation Expense = $52,800 x 8/12 = $35,200

2020

Annual Depreciation Expense = 2 x 20 % x ($132,000 - $35,200)

                                                    = $38,720

Conclusion :

Depreciation expense for the fiscal year ending on December 31, 2020 will be $38,720