Calhoun,Inc.purchased equipment at the beginning of 2017 for $180,000.Calhoun decided to depreciate the equipment over a five-year period using the double-declining-balance method.Calhoun estimated the equipment's residual value at $30,000.Which of the following statements is correct concerning Calhoun's financial statements at December 31,2017?

Question

Quizplus · Accepted Answer

The double-declining-balance method results in a higher depreciation expense in the early years of an asset's life. The depreciation rate for the double-declining-balance method is twice the straight-line depreciation rate. In this case, the straight-line depreciation rate would be 10% ($150,000 / 5 years). The double-declining-balance depreciation rate is therefore 20%. The depreciation expense for 2017 is $36,000 ($180,000 x 20%). The book value of the equipment at December 31, 2017 is $144,000 ($180,000 - $36,000).