A company purchased factory equipment for $700,000. It is estimated that the equipment will have a $70,000 salvage value at the end of its estimated 5-year useful life. If the company uses the double-declining-balance method of depreciation, the amount of annual depreciation recorded for the second year after purchase would beGroup of answer choices$252,000.$280,000.$120,960.$168,000.
Question
A company purchased factory equipment for 70,000 salvage value at the end of its estimated 5-year useful life. If the company uses the double-declining-balance method of depreciation, the amount of annual depreciation recorded for the second year after purchase would beGroup of answer choices280,000.168,000.
Solution
To calculate the annual depreciation recorded for the second year using the double-declining-balance method, we need to determine the depreciation rate and apply it to the initial cost of the equipment.
First, let's calculate the depreciation rate. The formula for the double-declining-balance method is 2 / useful life. In this case, the useful life is 5 years, so the depreciation rate is 2 / 5 = 0.4.
Next, we apply the depreciation rate to the initial cost of the equipment. The initial cost is 700,000 = $280,000.
For the second year, we need to calculate the book value of the equipment at the beginning of the year. The book value is the initial cost minus the accumulated depreciation. In the first year, the accumulated depreciation is 700,000 - 420,000.
Now, we can calculate the depreciation expense for the second year. Again, we apply the depreciation rate of 0.4 to the book value at the beginning of the year. The depreciation expense for the second year is 0.4 * 168,000.
Therefore, the amount of annual depreciation recorded for the second year after purchase using the double-declining-balance method would be $168,000.
Similar Questions
A company purchased factory equipment for P250,000. It is estimated that the equipment will have a P25,000 salvage value at the end of its estimated 5-year useful life. If the company uses the double-declining-balance method of depreciation, the amount of annual depreciation recorded for the second year after purchase would be
Gomez, Inc. purchased equipment on January 1, 2021 by paying $1,750,000 cash. Gomez, Inc. management estimated the equipment would have a salvage value of $70,000 at the end of its 12-year useful life. What will the accumulated depreciation balance for this equipment be at December 31, 2022? Use straight-line depreciation and round to the nearest dollar.
Equipment that cost $420,000 and on which $200,000 of accumulated depreciation has been recorded was disposed of for $180,000 cash. The entry to record this event would include aGroup of answer choicesloss of $40,000.credit to Accumulated Depreciation for $200,000.credit to the Equipment account for $220,000.gain of $40,000.
On the first day of its current fiscal year, Santiago Corporation purchased equipment costing $400,000 with a salvage value of $80,000. Depreciation expense for the year was $160,000. If Santiago uses the double-declining-balance method of depreciation, what is the estimated useful life of the asset?
Machinery is purchased for $140,000. It is estimated that it has a useful life of 5 years and a residual value of $20,000. Using the straight-line method, the balance in the accumulated depreciation account at the end of the third year of the machine’s useful life is:$68,000$140,000$72,000$24,000
Upgrade your grade with Knowee
Get personalized homework help. Review tough concepts in more detail, or go deeper into your topic by exploring other relevant questions.