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Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881

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BuyFindarrow_forward

Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881
Textbook Problem
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Refer to the information for Cox Inc. above. What amount would Cox record as depreciation expense at December 31, 2020, if the double-declining-balance method were used?

a. $187,200

b. $192,000

c. $195,200

d. $312, 000

To determine

Depreciation:

The depreciation is the expense which is debited to the income statement in the ratio of the period of the respective asset.

Accumulated Depreciation:

The accumulated depreciation is the account which is created to record the depreciation expense from the asset purchase time till the disposal time.

To select:

The correct expense as depreciation at December 31,2020 by using double declining balance method.

Explanation

The Cox Inc. acquired a machine with the following information:

Purchase Cost=$8,00,000Residual Value=$20,000Life of Asset=5 years

The formula for the double declining balance method is as follows:

Double declining rate=Straight line rate×2×value of asset at the beginningStraight line rate=(1 Useful life of asset)×100

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