Question

On January 2, 2019, Kornis Corporation acquired equipment for $1,500,000. The estimated life of the equipment is 5 years or 90,000 hours. The estimated residual value is $50,000. What is the balance in Accumulated Depreciation on December 31, 2019, if Kornis Corporation uses the double-declining-balance method of depreciation?

A) $290,000

B) $300,000

C) $580,000

D) $600,000

Answer 1

The correct answer is C.

Step-by-step explanation:

Giving the following information:

Purchase price= $1,500,000

The estimated life of the equipment is 5 years

The estimated residual value is $50,000.

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

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

Annual depreciation= 2*[(1,500,000 - 50,000)/5]

Annual depreciation= $580,000

Answer 2

D) $600,000

Step-by-step explanation:

The double-declining-balance method of depreciation = Depreciation factor x cost of asset

Depreciation factor = 2 x (1/useful life of the asset)

Depreciation factor = 2 / 5 = 0.4

Deprecation expense = 0.4 x $1,500,000 = $600,000

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