Mathers Equipment purchased a road grader on January 2nd, 2017, for $165,000. They plan to use the grader for eight years and 19,000 hours (3,000 hours each year in 2017-2019 and 2,000 hours each year in 2020-2024). Mathers hopes to sell the asset for $18,000 at the end of its useful life. Using the double-declining-balance method of depreciation, what amount of depreciation expense will Mathers record on the income statement for the year ended December 31st, 2017?

The amount of depreciation expense Mathers will record on the income statement for the year ended December 31st, 2017 is $41,250.

Explanation:

Determine the depreciable cost.

The depreciable cost = Acquisition cost - Salvage value.

replacing;

The depreciable cost = 165,000 - 18,000.

The depreciable cost = $147,000.

Determine the depreciation rate.

The annual depreciation expenses = Depreciable cost / useful life.

The annual depreciation expenses = 147,000 / 8.

The annual depreciation expenses = $18,375.

The depreciation rate = annual depreciation expenses / Depreciable cost.

The depreciation rate = (18,37 / 147,000) * 100

The depreciation rate = 12.5%

Since it's double declining balance method we multiply the rate by 2

= 12.5 * 2 = 25%.

Determine the depreciation expense for the year ended December 31st, 2017.

The depreciation expense = Acquisition cost * rate.

The depreciation expense = 165,000 * 25%.

The depreciation expense = $41,250.