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Ponderosa Farms purchased some equipment on January 1,2020 for $12,600.The equipment has an estimated useful life of 10 years and an estimated residual value of $1,200.The company uses double-declining-balance depreciation.
-The net book value on January 1,2021 would be
A)$10,080.
B)$10,320.
C)$11,340.
D)$11,460.

Question

Quizplus · Accepted Answer

Double-declining-balance depreciation rate can be calculated as: (1/Estimated useful life)*2
Thus, depreciation rate = (1/10)*2 = 0.2 or 20%
Depreciation for the first year = Depreciation rate * book value at the beginning of the year
= 0.2 * $12,600 = $2,520
Book value at the beginning of the year 2021 = $10,080 ($12,600 - $2,520)
Net book value on January 1, 2021 = $10,080 - $1,200 = $8,880 (after deducting the estimated residual value) 
Therefore, the net book value on January 1, 2021 would be $10,080.

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