A piece of equipment was acquired on January 1,2018,at a cost of $22,000,with an estimated residual value of $2,000 and an estimated useful life of four years.The company uses the double-declining-balance method.What is its book value at December 31,2019?
A)$5,500
B)$10,000
C)$11,000
D)$12,000

Question

Quizplus · Accepted Answer

Keep the estimated residual value of $2,000 in mind;book value cannot drop below residual value
Depreciation expense = Book value × (2 ÷ Useful life)
Depreciation expense = (Cost − Accumulated depreciation)× (2 ÷ Useful life)
2018:
= ($22,000 − $0)× 2 / 4 = $11,000
2019:
= ($22,000 − $11,000)× 2 / 4 = $5,500
Book value at end of 2019 = Cost − Accumulated depreciation
= $22,000 − ($11,000 + $5,500)= $5,500
The book value at end of 2019 is greater than the residual value of $2,000.As such,the amount calculated is the amount of depreciation that can be taken.

A Piece of Equipment Was Acquired on January 1,2018,at a Cost