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

The depreciation expense for the Jefferson Company's piece of equipment for 2015 under the double-declining-balance method is $11,250. This is calculated by applying a 25% depreciation rate to the book value of the asset at the beginning of 2015, which is $45,000 after the first year's depreciation.

Step-by-step explanation:

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

1. First, calculate the depreciation rate. Since the estimated life of the asset is 8 years, the straight-line depreciation rate would be 1/8, or 12.5%. The double-declining-balance method is twice that rate, so it would be 25%.
2. Then, apply the 25% depreciation rate to the book value of the asset at the beginning of 2015. Since the equipment was purchased at $60,000 and was depreciated by 25% in 2014, the book value at the beginning of 2015 would be $60,000 - ($60,000 * 25%) = $45,000.
3. Finally, calculate the depreciation expense for 2015 by applying the double-declining rate to the book value at the beginning of the year: $45,000 * 25% = $11,250.

Therefore, the depreciation expense for 2015 would be $11,250.