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 2015 is

Question

Quizplus · Accepted Answer

In the double-declining balance method, the depreciation rate is double the straight-line rate. The straight-line rate is 1/4 = 25%, so double is 50%. Depreciation for 2013: $126,000 * 50% = $63,000. Book value at end of 2013: $126,000 - $63,000 = $63,000. Depreciation for 2014: $63,000 * 50% = $31,500. Book value at end of 2014: $63,000 - $31,500 = $31,500. Depreciation for 2015: $31,500 * 50% = $15,750, but since the book value cannot go below the salvage value, the depreciation is $31,500 - $6,000 = $25,500.

Eagle Corporation Acquired a New Machine on January 2, 2013