Moldowa Co.purchased machinery that was installed and ready for use on January 3, 2010, at a total cost of $115,000.Residual value was estimated at $15,000.The machinery will be amortized over five years using the double declining-balance method.
For the year 2011, Vincent should record depreciation expense on this machinery of

Question

Quizplus · Accepted Answer

To calculate the depreciation expense using the double declining-balance method, we need to follow these steps:

1. Calculate the straight-line depreciation rate:
straight-line rate = (original cost - residual value) / useful life
straight-line rate = ($115,000 - $15,000) / 5 = $20,000 per year

2. Double the straight-line rate to get the DDB rate:
DDB rate = 2 x straight-line rate = 2 x $20,000 = $40,000 per year

3. Multiply the DDB rate by the beginning-of-year book value to get the depreciation expense for the year:
depreciation expense = DDB rate x book value
book value = original cost - accumulated depreciation
In this case, since it's the first year of depreciation, the book value is just the original cost:
book value = $115,000
depreciation expense = $40,000 x $115,000 = $27,600

Therefore, the correct answer is B) $27,600.