Slotkin Products purchased a machine for $39,000 on July 1, 2014. The company intends to depreciate it over 8 years using the double-declining balance method. Salvage value is $3,000. Depreciation for 2015 to the closest dollar is

Question

Quizplus · Accepted Answer

First, we need to calculate the annual depreciation rate:
Annual depreciation rate = 2 / years of useful life = 2 / 8 = 0.25 or 25%

Next, we need to calculate the depreciation expense for 2014:
Depreciation expense for 2014 = (purchase price - salvage value) x annual depreciation rate x (# of months in service /12)
Depreciation expense for 2014 = ($39,000 - $3,000) x 0.25 x (6 / 12) = $4,875

Finally, we can calculate the depreciation expense for 2015:
Depreciation expense for 2015 = (purchase price - accumulated depreciation - salvage value) x annual depreciation rate
Accumulated depreciation for 2014 = $4,875
Accumulated depreciation for 2015 = $4,875 + depreciation expense for 2015
Depreciation expense for 2015 = ($39,000 - $4,875 - $3,000) x 0.25 = $8,531.25

Rounding to the nearest dollar, the depreciation expense for 2015 is $8,531, which corresponds to choice C.

Slotkin Products Purchased a Machine for $39,000 on July 1