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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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On January 2, 2017, Garr Company acquired machinery at a cost of $320,000. This machinery was being depreciated by the double-declining-balance method over an estimated useful life of 8 years, with no residual value. At the beginning of 2019, Garr changed to the straight-line method of depreciation. What is the amount of depreciation expense that Garr should record for 2019?

  1. a. $22,500
  2. b. $30,000
  3. c. $36,000
  4. d. $140,000

To determine

Find the correct option, the option that indicates the correct depreciation expense that should be recorded by Company G in 2019.

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.

Double-declining-balance (DDB) 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.

Formula for double-declining-balance depreciation method:

Depreciation expense}=(Book value at the beginning of the period )  ×    Depreciation rate

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