Question

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On January 1, 2021, the Allegheny Corporation purchased equipment for $146,000. The estimated service life of the equipment is 10 years and the estimated residual value is $3,000. The equipment is expected to produce 220,000 units during its life.

Required:
Calculate depreciation for 2021 and 2022 using each of the following methods.

2. Double-declining balance.

Answer 1

Double-declining depreciation rate = 2 x 1/Useful life

= 2 x 1/10

= 20%

Depreciation expense for year 2021 = Cost of equipment x Double-declining depreciation rate

= 146,000 x 20%

= $29,200

Book value of equipment on January 1, 2022 = Cost of equipment - Depreciation expense for year 2021

= 146,000 - 29,200

= $116,800

Depreciation expense for year 2022 = Book value of equipment on January 1, 2022 x Double-declining depreciation rate

= 116,800 x 20%

= $23,360

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