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In: Accounting

Mink Inc. purchased machinery that was installed and ready for use on January 3, 2017, at...

Mink Inc. purchased machinery that was installed and ready for use on January 3, 2017, at a total cost of $230,000. Residual value was estimated at $30,000. The machinery will be depreciated over five years using the double declining-balance method. For the calendar year 2018, Mink should record depreciation expense on this machinery of a)$48,000. b)$55,200. c)$60,000. d)$92,000.

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Expert Solution

Answer: Option b $55,200

Double declining Balance depreciation = 2 × Straight-line depreciation rate × Book value at the beginning of the year
Depreciation rate = 100% / Life of the Asset
                                     = 100%/5
                                     =20%

Depreciation on 01 January 2018 = 2 * 20% * $230,000 = $92,000

Book value of Equioment on January 01 2018 = $230,000 - $92,000 = $138,000

Depreciation for the calender year 2018 = $138,000 * 2* 20% = $55,200

ekkarill92 answered 2 years ago
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