Question

A piece of equipment was acquired on January 1, 2018, at a cost of $55,000, with an estimated residual value of $5,000 and an estimated useful life of five years. The company uses the double-declining-balance method. What is its book value at December 31, 2019

Answer 1

Book value 2020= $18,000

Step-by-step explanation:

Giving the following information:

Purchasing price= $55,000

Residual value= $5,000

Useful life= 5 years

First, we need to determine the depreciation expense for 2018 and 2019. We will use the following formula:

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

2018= 2*[(55,000 - 5,000)/5]= 20,000

2019= 2*[(50,000 - 20,000)/5]= 12,000

Book value 2020= 30,000 - 12,000

Book value 2020= $18,000