Question

22. A company purchased factory equipment on January 1, 2018 for $200,000. It is estimated that the equipment will have a $20,000 salvage value at the end of its 10-year useful life. Using the straight-line method of depreciation, the amount to be recorded as Depreciation Expense at December 31, 2018 is a. $20,000 b. $18,000. c. $16,000. d. $14,000. 23. A company purchased factory equinment for $700,000. It is estimated that the equipment will have a $70,000 salvage value at the end of its estimated 10-year useful life. If the company uses the double-declining-balance method of depreciation, the amount of annual depreciation recorded for the 2nd year after purchase would be a. S100,800 b. $112,000. c. $126,000 d. $140,000

Answer 1

(22) Option B is correct. $18,000 Calculation: Depreciation Expense Straight line Method: = (cost of equipment - Salvage Value Useful life of equipment Depreciation Enpense at Dec 31, 2018 ($ 200,000 - $ 20,000) 10 years = $ 180,000 = 10 = $18,000 23 Option B is correct. $ 112,000 Calculation : Double - declining Balance Method: Depreciation = Book value x 12 x 100% x Useful life in years) Depreciatien for Year 1 = $ 700,000 X (2 x 100% ) 10 years) = $ 700,000 x 12 x 0.1) = $700,000 x 0.2 - $140,000 Years

Depreciation for year 2 = ( Book value - Year I depreciation) x/2 x 100% ( 10 years, = ($ 700,000 - $140,000) (2 x 011) - $560,000 x 012 = $112,000