Question

In: Accounting

Meek Corporation acquires a building at $32,000 for an estimated useful life of 20 years. Meek...

Meek Corporation acquires a building at $32,000 for an estimated useful life of 20 years. Meek estimates the building will have $12,000 residual value at the end of 20 years. Meek uses double declining balance method for depreciation. What's the depreciation expense at the end of second year? *

$1,680

$3,000

$2,880

$1,500

Solutions

Expert Solution

Correct Option C i.e. $2,880
Calculation of depreciation by double declining balance method
Annual Depreciation by SLM = (32000 - 12000)/ 20
                                                    =1000
SLM Depretiation Rate = 1000/(32000 - 12000)*100
                                         =5%
Depreciation rate for Double Declining balance method = 5%*2 i.e. 10%
Year Opening Carrying Value Depreciation Expense Accumulated Depreciation Carrying Value
Year 0 32000
Year 1 32000 3200 3200 28800
Year 2 28800 2880 6080 25920

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