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An equipment was purchased for $30,000
An equipment was purchased for $30,000. It has a useful life of 5 years, and a residual value of $4,000. Compute the depreciation expense for the second year using the double-declining-balance method.
Expert Solution
Computation of the depreciation expense for the second year using the double-declining-balance method:-
Straight line depreciation rate = 1 / Estimated useful life
= 1 / 5
= 20%
Double declining depreciation rate = Straight line depreciation rate * 2
= 20% * 2
= 40%
Depreciation expense for first year = Cost * Double declining depreciation rate
= $30,000 * 40%
= $12,000
Depreciation expense for second year = (Cost - Depreciation expense for first year) * Double declining depreciation rate
= ($30,000 - $12,000) * 40%
= $18,000 * 40%
= $7,200
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