On June 1, 2016 Morgan Manufacturing acquired a machine for $100,000 with an estimated useful life of 5 years and an estimated residual value of $10,000.The company uses the double declining method of depreciation and takes a full year's depreciation in the year of acquisition and none in the year of disposition.If the machine were disposed of for $16,000 on May 1, 2018, the loss on disposal would be
A)$20,000.
B)$26,400.
C)$24,000.
D)$36,000.

Question

Quizplus · Accepted Answer

Depreciation expense for 2016 = (100,000-10,000)/5 * 2 = $36,000Depreciation expense for 2017 = (100,000-10,000-36,000)/4 * 2 = $28,800Book value on May 1, 2018 = 100,000-36,000-28,800 = $35,200Loss on disposal = 35,200-16,000 = $19,200

On June 1, 2016 Morgan Manufacturing Acquired a Machine for $100,000