How do you do this problem with the double declining balance depreciation method?

A company bought equipment at a cost of $68,000. The equipment has an estimated residual value of $4,000 and an estimated life of eight years, or 12,500 hours of operation. The equipment was purchased on January 1, 2008. During the first year if operation, it was used for 1,800 hours. At the end of seven years, the company expects to replace this old equipment with a newer model at an estimated cost of $85,000.





if the company uses the double declining balance depreciation method, what amount is the depreciation expense for 2008?





A. $18,000


B. $17,000


C. $16,000


D. $15,000





if the company uses the straight line depreciation method and sells the equipment for 18,000 cash at the end of Year 7, what is the gain or loss on the sale?





A. $6,000


B. $18,000


C. $56,000


D.$68,000

How do you do this problem with the double declining balance depreciation method?
if the company uses the double declining balance depreciation method, what amount is the depreciation expense for 2008?


Estimated life of 8 yrs means simple depreciation rate is 100/8 = 12.5%. Double-declining rate would be 25%. For 2008, depn is 25% of $68,000 = $17,000 - Answer B





if the company uses the straight line depreciation method and sells the equipment for 18,000 cash at the end of Year 7, what is the gain or loss on the sale?


Depreciable cost = $68,000 - $4,000 = $64,000


Annual depn = $64,000/8 = $8,000 each year.


After 7 yrs, accum depn is $8,000 x 7 = $56,000, or net book value is $68,000 - $56,000 = $12,000. If you sold it for $18,000, you make a gain of $6,000 - Answer A

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