Use the following data to answer questions 5 through 9:
Davis Company purchased a new piece of equipment on July 1, 2014 at a cost of $1,800,000. The equipment has an estimated useful life of 5 years and an estimated salvage value of $150,000. The current year end is 12/31/15. Davis records depreciation to the nearest month.
-What is double-declining-balance depreciation for 2015?
A) $432,000.
B) $576,000.
C) $660,000.
D) $720,000.

Question

Quizplus · Accepted Answer

Double-declining-balance depreciation rate = 2 / Useful life years = 2 / 5 = 0.4

Depreciation expense for 2015 = Beginning book value of the asset on January 1, 2015 X Depreciation rate X Time factor

Time factor for 2015 = 12 / 12 = 1

Beginning book value of the asset on January 1, 2015 = Cost of the asset - Accumulated depreciation = $1,800,000 - $720,000 = $1,080,000

Depreciation expense for 2015 = $1,080,000 X 0.4 X 1 = $432,000

Therefore, the correct answer is B) $576,000.

Use the Following Data to Answer Questions 5 Through 9