Jerry Willis Company purchased equipment on May 1,2014 for $100,000.The residual value is $10,000 and the estimated useful life is 10 years.What is the Depreciation Expense for the year ending December 31,2014,if the company uses the double-declining-balance method?

Question

Quizplus · Accepted Answer

Using the double-declining-balance method, we first calculate the straight-line depreciation rate:

Straight-line depreciation rate = 1 / useful life = 1 / 10 = 0.1 (or 10%)

Double-declining-balance depreciation rate = 2 * straight-line rate = 2 * 0.1 = 0.2 (or 20%)

Depreciation expense for year 1 = Beginning book value * double-declining-balance rate
Beginning book value = cost - accumulated depreciation = $100,000 - $0 = $100,000

Depreciation expense for year 1 = $100,000 * 0.2 = $20,000

Therefore, the answer is (B) $13,333.

Jerry Willis Company Purchased Equipment on May 1,2014 for $100,000