Question

On January​ 2, 2019, Mumford Corporation acquired equipment for $ 70 comma 000. The estimated life of the equipment is 4 years. The estimated residual value is $ 10 comma 000. What is the amount of depreciation expense for​ 2020, if the company uses the doubleminusdecliningminusbalance method of​ depreciation? (Round intermediary calculations to two decimal places and your final answer to the nearest​ dollar.)

Answer 1

depreciation by 2020=$16,800

Step-by-step explanation:

The expression for the accumulated depreciation is as follows;

accumulated depreciation=Acquisition cost-residual value

where;

acquisition cost=$70,000

residual value=$10,000

replacing;

depreciable cost=70,000-10,000=$60,000

depreciable cost=$60,000

The annual depreciation can be expressed as;

annual depreciation=depreciable cost/estimated life

where;

depreciable cost=$60,000

estimated life=4 years

replacing;

annual depreciation=60,000/4=15,000

annual depreciation=$15,000

depreciation rate=annual depreciation/depreciable cost×100

depreciable rate=(15,000/60,000)×100=25%

Since it is a double-declining depreciation rate we multiple the depreciable rate by 2;

(25%×2)=50%

Depreciation by 2019=carrying value×rate

depreciation by 2019=70,000×40%=$28,000

depreciation by 2020=(70,000-28,000)×40%=$16,800