Michele Company purchased a piece of equipment for $65,000 with an estimated residual value of $15,000 on January 1, 2012. Its estimated life is 5 years. To the nearest dollar, what is the equipment's depreciation using the double-declining-balance method for 2013?

Question

Quizplus · Accepted Answer

To use the double-declining-balance method, we first need to calculate the straight-line depreciation rate. This is done by subtracting the residual value from the cost of the equipment, and then dividing by the estimated life:

($65,000 - $15,000) / 5 = $10,000 per year

The double-declining-balance rate is twice as much as the straight-line rate:

2 * $10,000 = $20,000

For the first year of depreciation, we simply use this rate:

$65,000 * $20,000 = $20,800

For the second year, we start with the book value at the end of the first year:

$65,000 - $20,800 = $44,200

Then we apply the double-declining-balance rate to this book value:

$44,200 * $20,000 = $15,600

Therefore, the correct answer is C) $15,600.

Michele Company Purchased a Piece of Equipment for $65,000 with an Estimated