On January 1, 2013, Frankfort Company made a basket purchase including land, a building and equipment for $760,000. The appraised values of the assets are $40,000 for the land, $680,000 for the building and $80,000 for equipment. Frankfort uses the double declining balance method of depreciation for the equipment which is estimated to have a useful life of four years and a salvage value of $10,000. The depreciation expense for 2013 for the equipment is:
A)$40,000.
B)$20,000.
C)$19,000.
D)$38,000.

Question

Quizplus · Accepted Answer

$80,000/($40,000 + $680,000 + $80,000) = 10% of total appraised value; $760,000 purchase price x 10% = $76,000 cost of equipment; $76,000 x (2 x 25% straight-line rate) = $38,000 depreciation expense in 2013.

On January 1, 2013, Frankfort Company Made a Basket Purchase