Josh Kindel purchased equipment for $50,000 on January 1.Its residual value is $5,000 with a useful life of 10 years.The amount of depreciation expense in the first year under the double declining-balance method is:

Question

Quizplus · Accepted Answer

Under the double declining-balance method, the depreciation rate is twice the straight-line rate.

Straight-line rate = 1 / useful life = 1/10 = 0.1 or 10%

Double declining-balance rate = 2 * straight-line rate = 2 * 10% = 20%

Depreciation expense for year 1 = Beginning book value * depreciation rate

Beginning book value = Cost - Accumulated depreciation = $50,000 - $0 = $50,000

Depreciation rate = 20%

Depreciation expense for year 1 = $50,000 * 20% = $10,000

Therefore, the correct answer is B) $10,000.

Josh Kindel Purchased Equipment for $50,000 on January 1