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Grove City Corp. On January 1, 2017, Grove City Corp. purchased a ship for $2,000,000. It...

Grove City Corp. On January 1, 2017, Grove City Corp. purchased a ship for $2,000,000. It has a ten-year useful life and a residual value of $50,000. The company uses the double-declining-balance method. What was the depreciation expense for Grove City Corp. for the year ended December 31, 2017? a. $0 b. $390,000 c. $400,000 d. $195,000

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Answer #1

Annual depreciation rate as per straight line method=100%/10=10%/year

Hence depreciation as per double decline balance method=2*Annual depreciation rate as per straight line method*Beginning value of each period

Year Beginning value Depreciation Ending value
2017 2,000,000 (2*10%*2,000,000)=$400,000 (2,000,000-400,000)=$1,600,000.
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