Klayton Corporation purchased factory equipment that was installed and put into service January 2, 2014, at a total cost of $120,000. Salvage value was estimated at $8,000. The equipment is being depreciated over four years using the double-declining balance method. For the year 2015, Klayton should record depreciation expense on this equipment of

Question

Quizplus · Accepted Answer

Double-declining balance method means that depreciation is calculated at twice the straight-line rate.

Straight-line rate = 1/4 = 0.25 (since the asset is being depreciated over 4 years)

Double-declining balance rate = 2 * 0.25 = 0.5

Depreciation expense for 2014 (the year the equipment was put into service) = $120,000 * 0.5 = $60,000

Depreciation expense for 2015 = ($120,000 - $60,000) * 0.5 = $30,000

Therefore, the answer is B, $30,000.

Klayton Corporation Purchased Factory Equipment That Was Installed and Put