Question

Sheffield Company purchases equipment on January 1, Year 1, at a cost of $570,000. The asset is expected to have a service life of 12 years and a salvage value of $51,300. Compute the amount of depreciation for each of Years 1 through 3 using the double-declining-balance method.

Answer 1

Answer:

Year 1 = $949,620

Year 2 = $79,141

Year 3 = $65,956

Explanation:

The depreciation expense for the year using the double-declining-balance method is calculated as :

Depreciation Expense = 2 x SLDP x BVSLDP

where,

SLDP = 100 ÷ number of useful life

         = 100 ÷ 12

         = 8.33 %

therefore,

Year 1

Depreciation Expense = 2 x 8.33 % x $570,000

                                      = $94,962

Year 2

Depreciation Expense = 2 x 8.33 % x ($570,000 - $94,962)

                                      = $79,141

Year 3

Depreciation Expense = 2 x 8.33 % x ($570,000 - $94,962 - $79,141)

                                      = $65,956