On July 31, 2017, equipment is purchased for $66,000 with a 4-year life expectancy and salvage value of $5,000. If the double-declining-balance method is used, calculate depreciation expense for the year ending December 31, 2017.

Question

Quizplus · Accepted Answer

The double-declining-balance method accelerates depreciation. The annual rate is double the straight-line rate. For a 4-year life, the straight-line rate is 25% (100% / 4 years), so the double rate is 50%. Depreciation for a full year would be $66,000 * 50% = $33,000. However, the equipment was purchased on July 31, meaning only 5 months of depreciation applies for 2017. Thus, the depreciation expense for 2017 is $33,000 * (5/12) = $13,750.

On July 31, 2017, Equipment Is Purchased for $66,000 with a 4-Year