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Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281

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BuyFindarrow_forward

Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281
Textbook Problem
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Albany Corporation purchased equipment at the beginning of Year 1 for $75,000. The asset does not have a residual value and is estimated to be in service for 8 years. Calculate the depreciation expense for Years 1 and 2 using the double-declining-balance method. Round to the nearest dollar.

To determine

Calculate the depreciation expense of Company A for year 1 and year 2 under double-declining balance method.

Explanation

Depreciation expense: Depreciation expense is a non-cash expense, which is recorded on the income statement reflecting the consumption of economic benefits of long-term asset on account of its wear and tear or obsolesces.

Double-declining-balance method: The depreciation method which assumes that the consumption of economic benefits of long-term asset is high in the early years but gradually declines towards the end of its useful life, is referred to as double-declining-balance method

Calculate the depreciation expense of Company A for year 1 and year 2 under double-declining balance method as follows:

Year 1:

Depreciation expense=Aquisition cost of equipment×Depreciation Rate (1)=$75,000×25100=$18,750

Year 2:

Depreciation 

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