Question

Cutter Enterprises purchased equipment for $63,000 on January 1, 2018. The equipment is expected to have a five-year life and a residual value of $6,000.

Using the double-declining balance method, depreciation for 2018 and the book value at December 31, 2018, would be:

Multiple Choice

• $22,800 and $40,200 respectively.

• $25,200 and $37,800 respectively.

• $25,200 and $31,800 respectively.

• $22,800 and $34,200 respectively.

Answer 1

Answer: $25,200 and $37,800 respectively.

Explanation

	Double Declining Balance Depreciation
Year	Beginning book value	x	Double the straight-	=	Depreciation expense
			line rate
2018	$              63,000.00	x	40.00%	=	$               25,200.00
Double-declining-balance rate = (100% / 5 years) × 2 = 40% per year
Book value at December 31, 2018 = $63,000 - $25,200 = $37,800