Bravo Company purchased equipment on October 1, 2016. Bravo paid $60,000 for equipment and paid an additional $500 for shipping and $200 to place the equipment in service. The equipment is expected to have a $6,000 residual value and a 8-year life. Bravo has a December 31 fiscal year end. Using the double-declining balance method, how much is: (Enter only whole dollar values.)

Question

Julio Mcpherson

Business

9 March, 16:00

Bravo Company purchased equipment on October 1, 2016. Bravo paid $60,000 for equipment and paid an additional $500 for shipping and $200 to place the equipment in service. The equipment is expected to have a $6,000 residual value and a 8-year life. Bravo has a December 31 fiscal year end. Using the double-declining balance method, how much is: (Enter only whole dollar values.)

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Answers (1)

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Hugo Bishop · Answer 1

depreciation expense = $3,794

Explanation:

We know,

Under the double-declining balance method, depreciation expense rate = (100% : useful life) * 2

Given,

Useful life = 8 year

Therefore, depreciation expense rate = (100% : 8) * 2 = 25%

Total cost of equipment = Purchase price + Shipping + Installment charge

Total cost of equipment = $60,000 + 500 + 200 = $60,700

Hence, the depreciation expense is for 1 year = $60,700 * 25% = $15,175

Depreciation expense is for 3 months = $15,175 * (3 : 12) = $3,794