Roho Company acquired equipment on July 1,2013,for $200,000.The residual value is $20,000 and the estimated life is 5 years or 40,000 hours.Compute the Depreciation Expense for the years ending December 31,2013 and December 31,2014 if Roho Company uses the double-declining-balance method of depreciation.

Question

Quizplus · Accepted Answer

First, calculate the depreciation rate per year:

Depreciation rate = 2 / estimated life = 2 / 5 = 0.4 or 40%

Then, calculate the depreciation expense for 2013:

Depreciation expense for 2013 = (cost - accumulated depreciation) x depreciation rate

Accumulated depreciation for 2013 = 0 (since it's the first year)

Depreciation expense for 2013 = (200,000 - 0) x 0.4 = 80,000

Next, calculate the book value at the end of 2013:

Book value at the end of 2013 = cost - accumulated depreciation for 2013
= 200,000 - 80,000 = 120,000

Now, calculate the depreciation expense for 2014:

Depreciation expense for 2014 = (book value at the beginning of 2014 - residual value) x depreciation rate

Book value at the beginning of 2014 = book value at the end of 2013 = 120,000

Depreciation expense for 2014 = (120,000 - 20,000) x 0.4 = 40,000

Therefore, the answer is B) $40,000 for 2013; $64,000 for 2014.

Roho Company Acquired Equipment on July 1,2013,for $200,000