On July 1, 2010, Gonzalez Corporation purchased factory equipment for $150,000.Residual value was estimated to be $4,000.The equipment will be depreciated over ten years using the double-declining balance method.Counting the year of acquisition as one-half year, Gonzalez should record depreciation expense for 2011 on this equipment of

Question

Quizplus · Accepted Answer

The double-declining balance method involves doubling the straight-line depreciation rate. The straight-line rate is 10% (1/10 years), so the double-declining rate is 20%. For 2010, half-year depreciation is $150,000 x 20% x 0.5 = $15,000. The book value at the start of 2011 is $135,000 ($150,000 - $15,000). Depreciation for 2011 is $135,000 x 20% = $27,000.

On July 1, 2010, Gonzalez Corporation Purchased Factory Equipment for $150,000.Residual