A piece of equipment was acquired on January 1,2009,at a cost of $22,000,with an estimated residual value of $2,000 and an estimated useful life of four years.The company uses the double-declining-balance method.What is its book value at December 31,2010?

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Quizplus · Accepted Answer

The double-declining-balance method is a depreciation method that allocates a larger portion of the depreciation expense to the earlier years of an asset's life. The formula for double-declining-balance depreciation is:Depreciation expense = (2 * Straight-line depreciation rate) * Book valueThe straight-line depreciation rate is calculated by dividing the depreciable cost of the asset (cost - residual value) by the estimated useful life of the asset.In this case, the depreciable cost of the asset is $22,000 - $2,000 = $20,000. The estimated useful life of the asset is four years. Therefore, the straight-line depreciation rate is 25% (100% / 4).The book value of the asset at December 31, 2010, is $22,000 - ($20,000 * 25% * 2) = $11,000.

A Piece of Equipment Was Acquired on January 1,2009,at a Cost