Question

Buffalo Wings Company purchased equipment for $120,000 on January 1, 2016, and will use the double-declining-balance method of depreciation. It is estimated that the equipment will have a 5-year life and a $6,000 salvage value at the end of its useful life. The amount of depreciation expense recognized in the year 2018 will be __________.

Answer 1

Depreciation expense for 2018 is $16,416

Step-by-step explanation:

Giving the following information:

Buffalo Wings Company purchased equipment for $120,000 on January 1, 2016. It is estimated that the equipment will have a 5-year life and a $6,000 salvage value at the end of its useful life.

To calculate the depreciation expense using the double-declining balance method, we need to use the following formula for each year:

Annual depreciation= 2*[(book value)/estimated life (years)]

2016= 2*[(120,000 - 6,000)/5]= 45,600

2017= 2*[(114,000 - 45,600)/5]= 27,360

2018= 2*[(68,400 - 27,360)/5]= 16,416