Question

Cinder Construction, a calendar-year company, purchased equipment for $124,000 on January 3rd, 2022. The equipment’s expected useful life is seven years, and the expected salvage value of the equipment is $16,000. What is the book value of the equipment on December 31st, 2023, if Cinder uses the double-declining-balance method?

Answer 1

Answer: $‭63,250.12

Step-by-step explanation:

Double Declining balance method depreciates at twice the rate that Straight line method does.

It also ignores the salvage value.

Straight line depreciation = 124,000/7 = $17,714

Rate = 17,714/124,000 = 14.29%

Double declining rate = 14.29 * 2 = 28.58%

Depreciation for 2022 = 124,000 * ( 1 - 28.58%) = $‭88,560.8‬0

Depreciation for 2023 = ‭88,560.8‬0 * (1 - 28.58%) = $‭63,250.12