Question

Shasta Exploring purchases a piece of equipment on January 1, 2012, for $50,000 and the equipment has an expected useful life of five years. Its residual value is estimated to be $4,000. Assuming Shasta uses the double-declining balance depreciation method, what is the depreciation expense for the equipment for 2013?

Group of answer choices $12,000 $11,040 $9,200 $9,040

Answer 1

Answer = $ 12,000

Explanation :

Double Declining Balance = 2 * Straight line method rate

Straight line Method rate = 1 / Estimated useful Life

Straight line Method rate = 1 / 5 Years = 20 %

Double Declining Balance = 2 * Straight line method rate

Double Declining Balance = 2 * 20%

Double Declining Balance = 40%

Year	Calculation of Depreciable Cost	Depreciation Cost	Percent	Depreciation Amount
2012	Initial Cost	$ 50,000	40%	$ 20,000   {$50,000*40%}
2013	{$50,000 -$ 20,000 }	$ 30,000	40%	$ 12,000    {$30,000*40%}

So, The Depreciation expenses for the Equipment for 2013 is $ 12,0000