Question

A company bought a piece of equipment for $44,200 and expects to use it for eight years. The company then plans to sell it for $4,700. The company has already recorded depreciation of $38,300.02. Using the double-declining-balance method, what is the company's annual depreciation expense for the upcoming year? (Round your answer to the nearest whole dollar amount.)

Answer 1

Based on the information available in the question , we can calculate the company's annual depreciation for the upcoming year as follows:-

Cost of the equipment - $44,200

Salvage value - $4,700

We can create the Double Declining balance method of Depreciation similar to the following table:-

Year	Carrying Value	DDB Percentage	Depreciation Expense	Accumulated Depreciation
1	44,200.00	25%	11,050.00	11,050.00
2	33,150.00	25%	8,287.50	19,337.50
3	24,862.50	25%	6,215.63	25,553.13
4	18,646.88	25%	4,661.72	30,214.84
5	13,985.16	25%	3,496.29	33,711.13
6	10,488.87	25%	2,622.22	36,333.35
7	7,866.65	25%	1,966.66	38,300.01

The Depreciation expense per year is calculated using the following formula:-

= Carrying value * DDB %

For example - For 2nd year, the depreciation expense per year is calculated as - $33,150 * 25% = $8,287.5

As can be observed from table above, the Accumulated depreciation towards the end of the 7th year is $38,300.

The remaining maximum amount of depreciation allowed on the equipment is:-

$44,200 - $4,700 (salvage value) = $39,500

Until the end of the 7th year , the accumulated depreciation is $38,300.

The balance depreciation during the upcoming year is :- $39,500 - $38,300 (charged till date) = $1,200

Hence, the Depreciation expense for the upcoming year is $1,200