Question

On the first day of its fiscal year, Scooter Co. purchased a computer system for a total cost of $50,000. The computer system is expected to have a useful life of 5 years with a residual value of $5,000. If the company uses the double-declining-balance method, its depreciation expense for the computer system in the first year will be:

Answer 1

$20000

Step-by-step explanation:

Given: Total cost of computer system= $50000.

Residual value= $5000.

Useful life= 5 years.

Now, calculating depreciation expense as per double-declining balance method.

`Depreciation\ expense= (cost- Accumlated\ depreciation)* (2)/(useful\ life)`

⇒
`Depreciation\ expense= (\$ 50000- \$0)* (2)/(5)`

⇒
`Depreciation\ expense= \$ 50000* (2)/(5)`

∴
`Depreciation\ expense= \$ 20000`

Hence, $20000 is the depreciation expense for first year as per double-declining balance method.