Question

Kansas Enterprises purchased equipment for $77,500 on January 1, 2021. The equipment is expected to have a five-year service life, with a residual value of $7,800 at the end of five years. Using the double-declining balance method, depreciation expense for 2022 would be: (Do not round your intermediate calculations) Multiple Cholce $16,728. $27,880. $31,000. $18,600.

Answer 1

ANSWER:

OPTION: $18600

EXPLANATION:

Under double declining balance method,

Depreciation per annum = 2 x straight line depreciation percentage x book value at the beginning of period

And,

Straight line depreciation percentage = 100%/useful life = 100%/5 = 20%

Therefore,

For year 2021:

Book value at the beginning of year = $77500

Depreciation expenses = 2 x 20% x $77500

= $31000

For year 2022:

Book value at the beginning of year = $77500 - $31000 = $46500

Depreciation expenses = 2 x 20% x $46500

= $18600