Use the following information for questions:
Western Farms purchased some equipment on January 1, 2011 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 amortization.
-The net book value on January 1, 2012 would be:
A)$10,080
B)$10,320
C)$11,340
D)$11,460

Question

Quizplus · Accepted Answer

The double-declining-balance method of depreciation involves doubling the straight-line rate of depreciation. The straight-line depreciation rate is 1/10 (or 10%) per year, given the useful life of 10 years. Doubling this rate gives 20% per year. For the first year, 20% of the initial cost ($12,600) is $2,520. Subtracting this from the initial cost gives a net book value of $12,600 - $2,520 = $10,080 on January 1, 2012.

Use the Following Information for Questions