Fields Company purchased equipment on January 1 for $180,000.This system has a useful life of 8 years and a salvage value of $20,000.The company estimates that the equipment will produce 40,000 units over its 8-year useful life.Actual units produced are: Year 1 - 4,000 units; Year 2 - 6,000 units; Year 3 - 8,000 units; Year 4 - 5,000 units; Year 5 - 4,000 units; Year 6 - 5,000 units; Year 7 - 7,000 units; Year 8 - 3,000 units.What would be the depreciation expense for the first year of its useful life using the double-declining-balance method?
A)$20,000.
B)$45,000.
C)$33,750.
D)$16,000.
E)$24,000.

Question

Quizplus · Accepted Answer

The double-declining-balance method calculates depreciation at twice the straight-line rate. The straight-line rate is 1/8 (since the useful life is 8 years), so the double rate is 2/8 or 1/4. The depreciation expense for the first year is 1/4 of the initial cost ($180,000), which is $45,000.

Fields Company Purchased Equipment on January 1 for $180,000