Question

Pebble Beach Co. buys a piece of equipment for $56,000. The equipment has a useful life of seven years. No residual value is expected at the end of the useful life. Using the double-declining-balance method, what is the company's depreciation expense in the first year of the equipment’s useful life?

Answer 1

The company's depreciation expense in the first year of the equipment’s useful life is $ 16,004.8.

Step-by-step explanation:

Determining the depreciable amount.

The depreciable amount = Asset acquisition - Salvage value

The depreciable amount = 56,000 - 0.

The depreciable amount = $56,000.

Determining the annual depreciation amount.

The annual depreciation amount = depreciable amount ÷ number of useful life.

The annual depreciation amount = 56,000 ÷ 7.

The annual depreciation amount = $8,000.

Determining the % depreciation rate.

The % depreciation rate = (annual depreciation amount / the depreciable amount)×100.

The % depreciation rate = (8,000 / 56,000)×100.

The % depreciation rate = 14.29%

Since its double declining rate,we multiply the % rate by 2.

The % depreciation rate is therefore = 28.58%

Determining the depreciation expense for year 1.

The depreciation expense for year 1 = Carrying value of asset × depreciation % rate.

The depreciation expense for year 1 =56,000 × 28.58%

The depreciation expense for year 1 = $ 16,004.8