Question

Cutter Enterprises purchased equipment for $63,000 on January 1, 2018. The equipment is expected to have...

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.

Homework Answers

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

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