Question

Jing Company was started on January 1, Year 1 when it issued common stock for $32,000 cash. Also, on January 1, Year 1 the company purchased office equipment that cost $15,600 cash. The equipment was delivered under terms FOB shipping point, and transportation cost was $1,700. The equipment had a five-year useful life and a $6,100 expected salvage value. Using double-declining-balance depreciation, what the amount of depreciation expense and the amount of accumulated depreciation, respectively, that would appear on the December 31, Year 3 financial statements?

Answer 1

Solution:

Cost of office equipment = $15,600 + $1,700 =$17,300

Useful life = 5 years

Depreciation rate - Straight line = 1/5 = 20%

Depreciation rate - DDB = 20%*2 = 40%

Expected salvage value = $6,100

Depreciation Schedule - Double Declining Balance Method
Year	Asset Cost	Book Value	Depreciation Rate	Depreciation Expense for the year	Accumulated Depreciation	Book Value
Purchase date	$17,300
1		$17,300	40%	$6,920.00	$6,920	$10,380
2		$10,380	40%	$4,152.00	$11,072	$6,228
3		$6,228		$128.00	$11,200	$6,100

Amount of depreciation expense would appear on the December 31, year 3 financial statements = $128

Amount of accumulated depreciation would appear on the December 31, year 3 financial statements = $11,200