Question

On January 1, 2016, Knapp Corporation acquired machinery at a cost of $250,000 with a useful...

On January 1, 2016, Knapp Corporation acquired machinery at a cost of $250,000 with a useful life of 8 years using the double-declining balance method of depreciation, with a residual value of 10,000.

At the beginning of 2019, a decision was made to change to the straight-line method of depreciation for the machinery.

The depreciation expense for 2019 would be (round up to nearest $1)

Select one:

a. $26,367

b. $30,000

c. $19,094

d. $18,286

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Answer #1

c.$19094

depreciation rate under double declining balance method = (1/8)x100x2=25%

Values of asset as on 2016 end = $250000-(250000x25%)=$187500

Value on 2017 end = $187500-(187500x25%) =$140625

Value on 2018 end or beginning of 2019 =$140625-(140625x25%) = $105468.75

remaining usefull life of the machinery = 5 years

salvage value = $10000

Depreciation for 2019 under straight line method =(Depreciable amount- salvage value)/usefull life remaining =(105468.75-10000)/5 = $19093.75 or $19094

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