Question

10) On January 2, 2019, Kornis Corporation acquired equipment for $1,500,000. The estimated life of the equipment is 5 years or 90,000 hours. The estimated residual value is $50,000. What is the balance in Accumulated Depreciation on December 31, 2019, if Kornis Corporation uses the double-declining-balance method of depreciation?

A) $290,000

B) $300,000

C) $580,000

D) $600,000

11) On January 2, 2019, Konan Corporation acquired equipment for $900,000. The estimated life of the equipment is 5 years or 100,000 hours. The estimated residual value is $20,000. What is the balance in Accumulated Depreciation on December 31, 2020, if Konan Corporation uses the double-declining-balance method of depreciation? (Round any intermediary calculations to two decimal places and your final answer to the nearest dollar.)

A) $576,000

B) $352,000

C) $216,000

D) $880,000

12) On January 2, 2019, Helmkamp Company purchased a $30,000 machine. It had an estimated useful life of 5 years and a residual value of $3,000. What is the amount of depreciation expense for 2020, the second year of the asset's life, using the double declining-balance method? (Round intermediary calculations to two decimal places and your final answer to the nearest dollar.)

A) $6,000

B) $7,200

C) $5,400

D) $12,000

Answer 1

10) Option D is correct.

Depreciation rate = 100%/5*2 =40%

Depreciation for year 2019 = 1500000*40%

= $600,000

11) The correct answer is not in the option

Depreciation rate = 1/estimated life*

= 1/5*2 = 40%

2019 depreciation = 900000*40% = 260,000

2020 depreciation = (900000-260000)*40% = $256000

Balance in Accumulated depreciation on Dec 31, 2020

= 260000+256000 = $516,000

12) Correct Option is B. $7,200

DOUBLE DECLINE METHOD = STRAIGHT LINE METHOD RATE *2

STRAIGHT LINE METHOD = COST - SALVAGE VALUE/ ESTIMATED LIFE

= 30000-3000/5 =5400

STRAIGHT LINE RATE = 5400*100/27000 = 20%

DOUBLE DECLINE RATE = 20*2 = 40%

DEPRECIATION AMOUNT IN SECOND YEAR OF ASSETS :

FIRST YEAR = 30000*40% = 12000

SECOND YEAR DEPRECIATION = (30000-12000) = 18000

=18000*40% = $7200