Bay Back Company acquired equipment on July 1, 2011, for $210,000. The residual value is $35,000 and the estimated life is 5 years or 40,000 hours. Compute the balance in accumulated depreciation as of December 31, 2013, if Bay Back Company uses the double-declining-balance method of depreciation.

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Quizplus · Accepted Answer

The double-declining-balance method involves depreciating the asset at twice the straight-line rate. The straight-line rate is 1/5 = 20%, so the double rate is 40%. For 2011 (half-year), depreciation is $210,000 * 40% * 0.5 = $42,000. For 2012, depreciation is ($210,000 - $42,000) * 40% = $67,200. For 2013, depreciation is ($210,000 - $42,000 - $67,200) * 40% = $40,320. Total accumulated depreciation by December 31, 2013, is $42,000 + $67,200 + $40,320 = $149,520.

Bay Back Company Acquired Equipment on July 1, 2011, for $210,000