Kingston Company purchased a piece of equipment on January 1 2016. The equipment cost $200000 and had an estimated life of 8 years and a salvage value of $25000. What was the depreciation expense for the asset for 2017 under the double-declining-balance method?

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The double-declining-balance method of depreciation involves doubling the straight-line rate of depreciation. The straight-line rate for an asset with a useful life of 8 years is 1/8 (or 12.5%) annually. Doubling this rate gives a depreciation rate of 25% per year under the double-declining-balance method. For the first year (2016), the depreciation expense is 25% of the initial cost ($200,000), which is $50,000. This reduces the book value of the asset to $150,000 ($200,000 - $50,000) at the beginning of 2017. For 2017, the depreciation expense is 25% of $150,000, which equals $37,500.

Kingston Company Purchased a Piece of Equipment on January 1