2. Red Skys, Inc. purchased equipment at the beginning of 2016 for $140,000. The company decided to depreciate the equipment over a 10-year period using the double-declining-balance method. The company estimated the equipment's salvage value at $12,000. Show how the costs should be presented on Red Sky's financial statements at December 31, 2017. Label the statements properly.
Double declining depreciation rate=2/useful life
= 2 / 10.
= .20 or 20%
Depreciation for 2016 = 140000*.20 = 28000
Book value at end of 2016 = 140000-28000 = 112000
Depreciation for 2017 = 112000 *.20 = 22400
Book value at end of 2017 = 112000-22400 = 89600
Income statement (Partial) for the period ended 2017 |
|
Operating expense | |
Depreciation expense | (22400) |
Balance sheet as on 2017 |
||
Asset | ||
property plant and equipment | ||
Equipment | 140000 | |
less:Accumulated depreciation [28000+22400] | (50400) | 89600 |
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