Question

Morten Co., which uses the double-declining-balance method of depreciation, purchased a new machine on January 1, 2018. The machine cost $160,000, had an estimated useful life of 8 years and $20,000 residual value at the end of its useful life What is the depreciation expense for 2018?

a. $40,000
b. $10,000
c. $30,000
d. $20,000

Answer 1

Annual depreciation= $35,000

Step-by-step explanation:

Giving the following information:

The machine cost $160,000.

Useful life= 8 years

Residual value= $20,000

To calculate the depreciation expense for 2018 under the double-declining balance, we need to use the following formula:

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

Annual depreciation= 2* [(160,000 - 20,000)/8]

Annual depreciation= $35,000