Question
A company purchased a piece of equipment for $250,000 on January 1, 2022, with an estimated useful life of 10 years and a residual value
A company purchased a piece of equipment for $250,000 on January 1, 2022, with an estimated useful life of 10 years and a residual value of $10,000. The company uses the double-declining balance method to depreciate the equipment. On December 31, 2023, the company decides to switch to the straight-line method. What is the total depreciation expense for 2022 and 2023 under the double-declining balance method, and what is the depreciation expense for 2024 under the straight-line method?
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The detailed answer for the above question is provided below The annual depreciation expense under the doubledeclining balance method can be calculated as follows Depreciation Rate 2 Estimated Useful Life Depreciation Expense Cost of Asset Accumulated Depreciation x Depreciation Rate The depreciation rate for the equipment under the doubledeclining balance method is Depreciation Rate 2 10 years 20 per year The depreciation expense for 2022 and 2023 under the doubledeclining balance method is calculated as follows Depreciation Expense for 2022 250000 0 x 20 50000 Depreciation Expense for 2023 250000 50000 x 20 40000 Therefore the total depreciation expense for 2022 and 2023 under the doubledeclining balance method is 50000 40000 90000 On December 31 2023 the company decides to switch to the straightline method Under the straightline method the annual depreciation expense can be calculated as follows Depreciation Expense Cost of Asset Residual Value Estimated Useful Life The cost of the equipment is 250000 and the residual value is 10000 The estimated useful life is still 10 years but two years of depreciation have already been recorded Therefore the remaining useful life is 8 years The annual depreciation expense under the straightline method is Depreciation Expense 250000 10000 8 years 30000 per year Therefore the depreciation expense for 2024 under the straightline method is 30000 To calculate ...
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Intermediate accounting
Authors: J. David Spiceland, James Sepe, Mark Nelson
7th edition
978-0077614041, 9780077446475, 77614046, 007744647X, 77647092, 978-0077647094
