A company bought a piece of equipment for $40,000,expecting to use it for eight years.The company then plans to sell it for $3,500.The company has already recorded depreciation of $35,995.Using the double-declining-balance method,the company's annual depreciation expense for the upcoming year would be:
A)$1,001.
B)$9,125.
C)$505.
D)$10,000.

Question

Quizplus · Accepted Answer

The double-declining-balance method calculates depreciation based on the book value at the beginning of the year. The book value is $40,000 - $35,995 = $4,005. The double-declining rate is 2/8 = 0.25. So, $4,005 * 0.25 = $1,001. However, the depreciation cannot reduce the book value below the salvage value of $3,500, so the depreciation expense is $4,005 - $3,500 = $505.

A Company Bought a Piece of Equipment for $40,000,expecting to Use