Cassidy Corporation purchased factory equipment that was installed and put into service on January 2, 2019, at a total cost of $55,000. Residual value was estimated at $3,000. The equipment is being depreciated over four years using the double-declining-balance method. For the calendar year 2020, Cassidy should record depreciation expense on this equipment of

Question

Quizplus · Accepted Answer

Under the double-declining-balance method, the annual depreciation rate is twice the straight-line rate. The straight-line rate is calculated as:

(1 / useful life) x 100%

In this case, the useful life is 4 years, so the straight-line rate is:

(1 / 4) x 100% = 25%

The annual depreciation rate under double-declining-balance is therefore:

2 x 25% = 50%

To calculate the depreciation expense for 2020, we need to apply this rate to the book value of the equipment at the beginning of the year. Since the equipment was depreciated for one full year in 2019, its book value at the beginning of 2020 is:

Cost - Accumulated Depreciation = $55,000 - ($55,000 x 50%) = $27,500

Therefore, the depreciation expense for 2020 is:

$27,500 x 50% = $13,750

So C is the correct answer.

Cassidy Corporation Purchased Factory Equipment That Was Installed and Put