Question

On January 1, Year One, the New Hampshire Herons organization purchased new workout equipment for its athletes. The equipment had a cost of $15,655, transportation costs of $505, and set-up costs of $345. The Herons spent an additional $405 training their athletes on the proper use of this equipment. The expected useful life is five years. No residual value is anticipated. How much accumulated depreciation should the Herons report after two years if the double-declining balance method is used?

a. $10,563

b. $10,822

c. $6,088

d.$10,146

Answer 1

The accumulated depreciation for the New Hampshire Herons' workout equipment after two years using the double-declining balance method is a. $10,563, by calculating 40% of the book value each year and summing up the depreciation over two years.

Step-by-step explanation:

To calculate the accumulated depreciation for the New Hampshire Herons' workout equipment after two years using the double-declining balance method, we follow these steps:

1. Calculate the initial book value by adding the cost of the equipment, transportation costs, and set-up costs. Training costs are not capitalized, so we exclude the $405 training expense. The initial book value is $15,655 (cost) + $505 (transportation) + $345 (setup) = $16,505.
2. Calculate the annual depreciation rate. Under the double-declining balance method, this is double the straight-line rate. Since the expected useful life is five years, the straight-line rate is 1/5, or 20%. Therefore, the double-declining rate is 40%.
3. For the first year, the depreciation expense is 40% of the $16,505 book value, which is $6,602.
4. Subtract the first year's depreciation from the initial book value to get the end-of-first-year book value, $16,505 - $6,602 = $9,903.
5. For the second year, the depreciation expense is 40% of the new book value, $9,903, which is $3,961.20.
6. The total accumulated depreciation after two years is the sum of the first and second years' depreciation: $6,602 (first year) + $3,961.20 (second year) = $10,563.20.

Therefore, the accumulated depreciation that the New Hampshire Herons should report after two years is $10,563, which corresponds to option a.