Calhoun, Inc.purchased equipment at the beginning of 2015 for $180,000.Rose decided to depreciate the equipment over a 5-year period using the double-declining-balance method.Calhoun estimated the equipment's residual value at $30,000.Which of the following statements is correct concerning Rose's financial statements at December 31, 2015?

Question

Quizplus · Accepted Answer

The double-declining-balance method results in a higher depreciation expense in the early years of an asset's life. In this case, the depreciation expense for 2015 would be $60,000, which is 40% of the book value of the equipment at the beginning of the year ($180,000 - $30,000 = $150,000). The book value of the equipment at December 31, 2015 would be $108,000 ($180,000 - $60,000 - $12,000).