Gump Shrimp Company
On January 1, 2011, Gump Shrimp Company purchased a ship for $1,000,000. It has a ten-year useful life and a salvage value of $100,000. The company uses the double-declining-balance method.
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Refer to the information provided for Gump Shrimp Company. What was the depreciation expense for Gump Shrimp for the year ended December 31, 2011?

Question

Gump Shrimp Company 
On January 1, 2011, Gump Shrimp Company purchased a ship for $1,000,000. It has a ten-year useful life and a salvage value of $100,000. The company uses the double-declining-balance method.
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Refer to the information provided for Gump Shrimp Company. What was the depreciation expense for Gump Shrimp for the year ended December 31, 2011?

Quizplus · Accepted Answer

The double-declining-balance method calculates depreciation by doubling the straight-line rate. The straight-line rate is 1/10 = 10%, so double is 20%. Depreciation for 2011 is 20% of $1,000,000, which is $200,000.