On January 1, Year 1, Jing Company purchased office equipment that cost $35,875 cash. The equipment was delivered under terms free on board (FOB)shipping point, and transportation cost was $3,875. The equipment had a five-year useful life and a $13,050 expected salvage value.Assuming the company uses the double-declining-balance depreciation method, what are the amounts of depreciation expense and accumulated depreciation, respectively, that would be reported in the financial statements prepared as of December 31, Year 3?

Question

Quizplus · Accepted Answer

The initial cost of the equipment is $39,750 ($35,875 + $3,875). Using the double-declining-balance method, the depreciation rate is 40% (2/5 years). Year 1 depreciation is $15,900, Year 2 is $9,540, and Year 3 is $5,724. Accumulated depreciation by Year 3 is $31,164. However, the depreciation expense for Year 3 is adjusted to ensure the book value does not go below the salvage value, resulting in $1,260 for Year 3, making accumulated depreciation $26,700.

On January 1, Year 1, Jing Company Purchased Office Equipment