Question

On August 1, 2022, Reading Lasses purchases new furniture at a cost of $22,000. The furniture has an estimated 10 -year life, and a $500 salvage value. If Reading Lasses uses double-declining balance, what amount of depreciation expense would it record as of December 31,2022?

Answer 1

To calculate the depreciation expense for Reading Lasses using the double-declining balance method, we need to use the formula and the given information. The steps involve calculating the book value and the accumulated depreciation, and then substituting the values in the formula to find the depreciation expense.

Step-by-step explanation:

To calculate the depreciation expense using the double-declining balance method, we need to know the asset's cost, salvage value, and useful life. In this case, the cost of the furniture is $22,000, the salvage value is $500, and the useful life is 10 years.

The formula to calculate depreciation using double-declining balance is:

Depreciation Expense = (2 / Useful Life) * (Book Value - Salvage Value)

Let's calculate the book value at the end of 2022:

Book Value = Cost - Accumulated Depreciation

Accumulated Depreciation = (Depreciation Expense / Year) * Months

Since we want the depreciation expense as of December 31, 2022, which is 5 months into the year, we can calculate:

1. Depreciation Expense = (2 / 10) * (Book Value - $500)
2. Book Value = $22,000 - Accumulated Depreciation
3. Accumulated Depreciation = (Depreciation Expense / 12) * 5 months
4. Substitute the values and solve for Depreciation Expense.

By following these steps, you can find the amount of depreciation expense Reading Lasses would record as of December 31, 2022.