Jerry Willis Company purchased equipment on May 1, 2017 for $100,000. The residual value is $15,000 and the estimated useful life is 10 years. What is the Depreciation Expense for the year ending December 31, 2017, if the company uses the double-declining-balance method? (Round your final answer to the nearest dollar.)

Question

Quizplus · Accepted Answer

The double-declining-balance method calculates depreciation expense as a percentage of the book value (cost - accumulated depreciation) of the asset. The percentage used is twice the straight-line depreciation rate. In this case, the straight-line depreciation rate is 10% (100% / 10 years). Therefore, the double-declining-balance depreciation rate is 20%.The book value of the asset on December 31, 2017 is $100,000 - (20% x $100,000 x 8/12) = $80,000. Therefore, the depreciation expense for the year ending December 31, 2017 is $80,000 x 20% = $16,000.

Jerry Willis Company Purchased Equipment on May 1, 2017 for $100,000