Morten Co., which uses the double-declining-balance method of depreciation, purchased a new machine on January 1, 2018. The machine cost $160,000, had an estimated useful life of 8 years and $20,000 residual value at the end of its useful life What is the depreciation expense for 2018?

a. $40,000

b. $10,000

c. $30,000

d. $20,000

Annual depreciation = $35,000

Explanation:

Giving the following information:

The machine cost $160,000.

Useful life = 8 years

Residual value = $20,000

To calculate the depreciation expense for 2018 under the double-declining balance, we need to use the following formula:

Annual depreciation = 2*[ (book value) / estimated life (years) ]

Annual depreciation = 2 * [ (160,000 - 20,000) / 8]

Annual depreciation = $35,000