Eagle Corporation acquired a new machine on January 2, 2013 at a cost of $126,000. The machine has an expected 4 year life and a salvage value of $6,000.
-If Eagle uses the double-declining balance depreciation method,the depreciation expense in 2014 is

Question

Quizplus · Accepted Answer

With the double-declining balance method, the depreciation rate is twice that of the straight-line method. Therefore, the depreciation expense in the first year is:

Depreciation rate = 2 / 4 = 0.5 or 50%
Depreciation expense for 2013 = $126,000 * 50% = $63,000

For the second year, we apply the same depreciation rate to the remaining balance of the asset, which is:

Carrying value at the beginning of 2014 = $126,000 - $63,000 = $63,000
Depreciation expense for 2014 = $63,000 * 50% = $31,500

Therefore, the answer is C) $31,500.

Eagle Corporation Acquired a New Machine on January 2, 2013