On January 1, 2010, Desmet Company purchased office equipment that cost $15,000 cash. The equipment was delivered under terms FOB shipping point, and transportation cost was $1,000. The equipment had a five year useful life and a $1,200 expected salvage value.
If Desmet Company had used the double-declining balance depreciation method, the depreciation expense appearing on the 2014 income statement would be:

Question

Quizplus · Accepted Answer

First, we need to calculate the depreciation amount per year using the double-declining balance method.
Depreciation rate for double-declining balance = 2/5 = 40%
Year 1 depreciation expense = $15,000 * 40% = $6,000
Year 2 depreciation expense = ($15,000 - $6,000) * 40% = $3,600
Year 3 depreciation expense = ($15,000 - $6,000 - $3,600) * 40% = $2,160
Year 4 depreciation expense = ($15,000 - $6,000 - $3,600 - $2,160) * 40% = $1,296
Year 5 depreciation expense = ($15,000 - $6,000 - $3,600 - $2,160 - $1,296) * 40% = $777.60
Therefore, the depreciation expense appearing on the 2014 income statement (year 5) would be $777.60.

On January 1, 2010, Desmet Company Purchased Office Equipment That