Mink Inc.purchased machinery that was installed and ready for use on January 3, 2017, at a total cost of $230,000.Residual value was estimated at $30,000.The machinery will be depreciated over five years using the double declining-balance method.For the calendar year 2018, Mink should record depreciation expense on this machinery of
A)$48,000.
B)$55,200.
C)$60,000.
D)$92,000.

Question

Quizplus · Accepted Answer

The double declining-balance method doubles the straight-line rate and applies it to the undepreciated balance each year. To calculate the straight-line rate, we need to subtract the estimated residual value from the total cost and divide it by the estimated useful life in years:

Straight-line rate = (Total cost - Residual value) / Useful life
Straight-line rate = ($230,000 - $30,000) / 5
Straight-line rate = $40,000

Double declining-balance rate = 2 * Straight-line rate
Double declining-balance rate = 2 * $40,000
Double declining-balance rate = $80,000

Now we can calculate the depreciation expense for 2018 by applying the double declining-balance rate to the beginning balance of the asset, which is the total cost:

Depreciation expense for 2018 = Beginning balance * Double declining-balance rate / Useful life
Depreciation expense for 2018 = $230,000 * $80,000 / (2 * 5)
Depreciation expense for 2018 = $55,200

Mink Incpurchased Machinery That Was Installed and Ready for Use on on January