Calhoun, Inc. purchased equipment at the beginning of 2015 for $180,000. Calhoun 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. The depreciation rate is 2 times the straight-line rate, which is 20% in this case (100% / 5 years). The depreciation expense for 2015 is $36,000 (20% x $180,000). The book value of the equipment at December 31, 2015 is $144,000 ($180,000 - $36,000).