On July 1, 2014, Mendes Corporation purchased factory equipment for $225,000. Salvage value was estimated to be $6,000. The equipment will be depreciated over five years using the double-declining balance method. Counting the year of acquisition as one-half year, Mendes should record depreciation expense for 2015 on this equipment of

Question

Quizplus · Accepted Answer

The double-declining balance method calculates depreciation by doubling the straight-line rate. The straight-line rate is 20% (1/5 years), so the double-declining rate is 40%. For 2014, depreciation is $225,000 * 40% * 0.5 = $45,000. The book value at the start of 2015 is $225,000 - $45,000 = $180,000. Depreciation for 2015 is $180,000 * 40% = $72,000.

On July 1, 2014, Mendes Corporation Purchased Factory Equipment for $225,000