Clear Window Cleaners
Clear Window Cleaners purchased new cleaning equipment at the beginning of 2011. The equipment has a cost of $53,000, an estimated life of 5 years, and an estimated residual value of $3,000. A full year's depreciation expense is to be recorded in 2011. The equipment was used 20,000 hours during 2011 and 24,000 hours during 2012. The number of expected hours over five years is 125,000.
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Refer to the information provided for Clear Window Cleaners. What is the amount by which double-declining-balance depreciation exceeds straight-line depreciation in the first year of the equipment?
A) $11,200
B) $13,200
C) $21,200
D) $12,720

Question

Clear Window Cleaners 
Clear Window Cleaners purchased new cleaning equipment at the beginning of 2011. The equipment has a cost of $53,000, an estimated life of 5 years, and an estimated residual value of $3,000. A full year's depreciation expense is to be recorded in 2011. The equipment was used 20,000 hours during 2011 and 24,000 hours during 2012. The number of expected hours over five years is 125,000.
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Refer to the information provided for Clear Window Cleaners. What is the amount by which double-declining-balance depreciation exceeds straight-line depreciation in the first year of the equipment?
A) $11,200
B) $13,200
C) $21,200
D) $12,720

Quizplus · Accepted Answer

Double-declining-balance depreciation is twice the straight-line depreciation rate multiplied by the book value of the asset. The straight-line depreciation rate is calculated by dividing the depreciable cost of the asset by its estimated life. The depreciable cost of the asset is the cost of the asset minus its residual value.The depreciable cost of the asset is $53,000 - $3,000 = $50,000. The straight-line depreciation rate is $50,000 / 5 = $10,000. The double-declining-balance depreciation rate is 2 * $10,000 = $20,000.The book value of the asset at the beginning of 2011 is $53,000. The double-declining-balance depreciation expense for 2011 is $20,000 * $53,000 = $10,600. The straight-line depreciation expense for 2011 is $10,000 * $53,000 = $5,300.The amount by which double-declining-balance depreciation exceeds straight-line depreciation in the first year of the equipment is $10,600 - $5,300 = $5,300.