Lester Company purchases a piece of equipment on Jan.2,2010,for $30,000.The equipment has an estimated life of eight years or 50,000 units of production and an estimated residual value of $3,000.Lester uses a calendar fiscal year.The entry to record the amount of depreciation for 2010,using the double-declining-balance method,is:

Question

Quizplus · Accepted Answer

The double-declining-balance method is an accelerated depreciation method that results in higher depreciation expense in earlier years of the asset's life.

To calculate depreciation expense using the double-declining-balance method, you first calculate the straight-line rate, which is (1/expected life). In this case, the straight-line rate is (1/8), or 0.125.

Next, to calculate the double-declining-balance rate, you multiply the straight-line rate by 2. In this case, the double-declining-balance rate is 0.125 x 2 = 0.25.

Finally, to calculate the depreciation expense for the year, you multiply the beginning book value of the asset by the double-declining-balance rate. The beginning book value is the original cost of the asset minus any accumulated depreciation.

For the first year of the asset's life, the beginning book value is $30,000, and there is no accumulated depreciation, so the depreciation expense for 2010 is:

Depreciation expense = Beginning book value x Double-declining-balance rate
Depreciation expense = $30,000 x 0.25
Depreciation expense = $7,500

Therefore, the correct entry to record the amount of depreciation for 2010 using the double-declining-balance method is:

Depreciation Expense - Equipment                                      7,500
Accumulated Depreciation - Equipment                              7,500

Lester Company Purchases a Piece of Equipment on Jan Depreciation Expense- Equipment 4,500 Cash 4,500\begin{array} { l } \text { Depreciation Expense- Equipment }&4,500 \\\quad \text { Cash }&&4,500\end{array} Depreciation Expense- Equipment Cash ​4,500​4,500​

Lester Company Purchases a Piece of Equipment on Jan $\begin{array} { l } \text { Depreciation Expense- Equipment }&4,500 \\\quad \text { Cash }&&4,500\end{array}$