Question

On January 1, 2019 Fantasy Cruise Lines purchased a ship for $1,000,000. The ship has a...

On January 1, 2019 Fantasy Cruise Lines purchased a ship for $1,000,000. The ship has a 10 year useful life and an estimated residual value of $100,000. The company uses the double declining balance method. What is the amount of depreciation expense for the year ended December 31, 2020?
  • A. $0
  • B. $180,000
  • C. $160,000
  • D. $200,000
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Homework Answers

Answer #1

Answer: C. $160,000

Explanation

Double Declining Balance Depreciation
Beginning book value x Double the straight- = Depreciation expense
line rate
Depreciation on December 31, 2019 $          1,000,000.00 x 20% = $             200,000.00
Depreciation on December 31, 2020 $            800,000.00 x 20% = $             160,000.00
Explanation:
Double-declining-balance rate = (100% / 10 years) × 2 = 20% per year
Book value at beginning of year 2020 = $1,000,000 - $200,000 = $800,000
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