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13 August, 23:44

Pebble Beach Co. buys a piece of equipment for $56,000. The equipment has a useful life of seven years. No residual value is expected at the end of the useful life. Using the double-declining-balance method, what is the company's depreciation expense in the first year of the equipment's useful life?

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  1. 13 August, 23:58
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    The company's depreciation expense in the first year of the equipment's useful life is $ 16,004.8.

    Explanation:

    Determining the depreciable amount.

    The depreciable amount = Asset acquisition - Salvage value

    The depreciable amount = 56,000 - 0.

    The depreciable amount = $56,000.

    Determining the annual depreciation amount.

    The annual depreciation amount = depreciable amount : number of useful life.

    The annual depreciation amount = 56,000 : 7.

    The annual depreciation amount = $8,000.

    Determining the % depreciation rate.

    The % depreciation rate = (annual depreciation amount / the depreciable amount) * 100.

    The % depreciation rate = (8,000 / 56,000) * 100.

    The % depreciation rate = 14.29%

    Since its double declining rate, we multiply the % rate by 2.

    The % depreciation rate is therefore = 28.58%

    Determining the depreciation expense for year 1.

    The depreciation expense for year 1 = Carrying value of asset * depreciation % rate.

    The depreciation expense for year 1 = 56,000 * 28.58%

    The depreciation expense for year 1 = $ 16,004.8
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