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Jing Company was started on January 1,2016 when it issued common stock for $50,000 cash.Also,on January 1,2016 the company purchased office equipment that cost $34,000 cash.The equipment was delivered under terms FOB shipping point,and transportation cost was $2,000.The equipment had a five-year useful life and a $12,000 expected salvage value.
-At the end of 2020,assuming the equipment had not been sold,the book value of the office equipment using straight-line depreciation and double-declining balance depreciation,respectively,would be:
A)$12,000/$1,680.
B)$12,000/$12,000.
C)$0/$0.
D)None of these answer choices are correct.

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Jing Company was started on January 1,2016 when it issued common stock for $50,000 cash.Also,on January 1,2016 the company purchased office equipment that cost $34,000 cash.The equipment was delivered under terms FOB shipping point,and transportation cost was $2,000.The equipment had a five-year useful life and a $12,000 expected salvage value.
-At the end of 2020,assuming the equipment had not been sold,the book value of the office equipment using straight-line depreciation and double-declining balance depreciation,respectively,would be:
A)$12,000/$1,680.
B)$12,000/$12,000.
C)$0/$0.
D)None of these answer choices are correct.

Quizplus · Accepted Answer

Using straight-line depreciation, the yearly depreciation expense is ($34,000 - $12,000) / 5 = $4,400. After 5 years, the accumulated depreciation would be $4,400 x 5 = $22,000 and the book value would be $34,000 - $22,000 = $12,000. Using double-declining balance depreciation, the annual depreciation expense in year 1 would be (2 / 5) x $34,000 = $13,600. In year 2, the annual depreciation expense would be (2 / 5) x ($34,000 - $13,600) = $8,160, and so on. After 5 years, the accumulated depreciation would be $49,496 and the book value would be $34,000 - $49,496 = -$15,496, which is not possible. Therefore, the best answer choice is B.

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