Question

Jefferson Company purchased a piece of equipment on January 1, 2014. The equipment cost $60,000 and had an estimated life of 8 years and a salvage value of $8,000. What was the depreciation expense for the asset for 2015 under the double-declining-balance method?

Answer 1

To calculate the depreciation expense for 2015 under the double-declining-balance method, multiply the double-declining-balance rate by the beginning book value of the asset and subtract this amount from the previous year's book value.

Step-by-step explanation:

To calculate the depreciation expense using the double-declining-balance method, you need to follow these steps:

1. Calculate the straight-line depreciation rate by dividing 1 by the estimated life of the equipment. In this case, 1/8 = 0.125
2. Double the straight-line depreciation rate. 0.125 x 2 = 0.25
3. Multiply the double-declining-balance rate by the beginning book value of the asset. In this case, the beginning book value is $60,000.
4. Repeat this process until the asset's book value reaches the salvage value of $8,000.

The depreciation expense for 2015 under the double-declining-balance method can be calculated as follows:

• Year 1: $60,000 x 0.25 = $15,000
• Year 2: ($60,000 - $15,000) x 0.25 = $11,250

Therefore, the depreciation expense for the asset for 2015 under the double-declining-balance method is $11,250.