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On January 1, 2012, the company purchased equipment for $600,000. The equipment has a 20-year expected...

On January 1, 2012, the company purchased equipment for $600,000. The equipment has a 20-year expected useful life and $0 residual value. Initially, the company used double-declining balance depreciation. On January 1, 2015, the company changed to straight-line depreciation. The expected useful life was reduced from 20 to 15 years. The residual value was unchanged. Compute depreciation expense for 2015. Ignore income taxes.

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Answer #1

First lets calculate the depreciation rate,

(Asset value-residual value)/useful life of asset= 600000/20= 30000 per year

therefore depreciation rate= 30000/600000= 5%

Under double declining method , depreciation= 2*(rate under straight line method)*balance in the beginning.

Therefore, on january1,2015 value of equipment will be $437400. From here on straight line depreciation is followed. Also expected useful life has been changed to 15 years

depreciation expense for 2015= 437400/15= 29160

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