Question

On January 1, 2017, Atlantic Company purchased a new warehouse for $840,000 with a salvage value of $40,000 and an estimated useful life of 40 years. Atlantic has chosen to use the double-declining balance method of depreciation. The journal entry to record the depreciation expense of 2018 would include:

Question 19 options:

	A. a debit to Depreciation Expense for $42,000.
	B. a debit to Depreciation Expense for $39,900.
	C. a credit to Accumulated Depreciation for $42,000.
	D. a debit to Accumulated Depreciation for $39,900.
	E. a credit to Accumulated Depreciation for $21,900.

Answer 1

Correct answer---------------B. a debit to Depreciation Expense for $39,900.

.

Depreciation expense will be debited and Accumulated depreciation will be credited with $39,900

Double declining Method
	Cost	$ 840,000
B	Residual Value	$ 40,000
C=A - B	Depreciable base	$ 800,000
D	Life [in years]	40
E=C/D	Annual SLM depreciation	$ 20,000
F=E/C	SLM Rate	2.50%
G=F x 2	DDB Rate	5.00%

.

Depreciation schedule-Double declining
Year	Beginning Book Value	Depreciation rate	Depreciation expense	Accumulated Depreciation	Ending Book Value
2017	$ 840,000	5.00%	$ 42,000	$ 42,000	$ 798,000
2018	$ 798,000	5.00%	$ 39,900	$ 81,900	$ 758,100