Question

schager company purchased a computer system on january 1, 2022, at a cash cost of $25,800. the estimated useful life is 10 years, and the estimated residual value is $3,400. the company will use the double declining-balance depreciation method. how much is the 2023 depreciation expense?

Answer 1

The double declining-balance method is a method of accelerated depreciation that calculates depreciation expense by taking twice the straight-line depreciation rate of an asset and applying it to the declining book value of the asset.

Step-by-step explanation:

First, we need to calculate the straight-line depreciation rate which is (cost of the asset - residual value) / useful life.

The straight-line depreciation rate = ($25,800 - $3,400) / 10 = $2,360 per year.

Then we can calculate the double declining balance rate, which is 2 * straight-line rate.

Double declining-balance rate = 2 * (2,360 /10) = 2 * 0.236 = 0.472 or 47.2%

To calculate the depreciation expense for 2023, we take the cost of the asset minus the accumulated depreciation and multiply it by the double-declining balance rate.

At the beginning of 2023, the accumulated depreciation is $0, and the book value of the asset is $25,800.

Depreciation expense for 2023 = ($25,800 - $0) * 0.472 = $12,194

Therefore, the 2023 depreciation expense is $12,194.