Question

View Policies Current Attempt in Progress Sheridan Company acquires equipment at a cost of $44.100 on January 3, 2021. Management estimates the equipment will have a residual value of $6,300 at the end of its 4-year useful life. Assume that the company uses the diminishing-balance method and that the diminishing-balance depreciation rate is double the straight-line rate. Calculate the depreciation expense for each year of the equipment's life. Do not leave any answer field blank. Enter o for amounts.) Depreciation - 2021 $ I Depreciation - 2022 $ Depreciation - 2023 $ Depreciation - 2024 $ Attempts: 0 of 1 used Submit Answer Save for Later lol

Answer 1

Solution

Depreciation-2021	$ 22,050
Depreciation-2022	$ 11,025
Depreciation-2023	$ 4,725
Depreciation-2024	$ 0

Working

Double declining Method
A	Cost	$ 44,100
B	Residual Value	$ 6,300
C=A - B	Depreciable base	$ 37,800
D	Life [in years]	4
E=C/D	Annual SLM depreciation	$ 9,450
F=E/C	SLM Rate	25.00%
G=F x 2	DDB Rate	50.00%

.

Depreciation schedule-Double declining
Year	Beginning Book Value	Depreciation rate	Depreciation expense	Accumulated Depreciation	Ending Book Value
2021	$ 44,100	50.00%	$ 22,050	$ 22,050	$ 22,050
2022	$ 22,050	50.00%	$ 11,025	$ 33,075	$ 11,025
2023	$ 11,025	50.00%	$ 4,725	$ 37,800	$ 6,300
2024	$ 6,300	50.00%	$ 0	$ 37,800	$ 6,300

.

It can be seen that in Double declining balance method depreciation expense in year 2023 is not 50% because 50% depreciation would make ending book value lower than residual value so depreciation is limited to an amount which makes ending book value equal to residual value.

The same reason applies to year 2024 where there is no depreciation because ending book value is already equal to residual value.