Problems 7-12 use the following information: A firm purchased a new piece of equipment with an estimated useful life of five years. The cost of the equipment was $55,000. The salvage value is estimated to by $5,000 at the end of year 5. Using the Double-Declining Balance method of depreciation, what is the value of depreciation for year 5? A.2,128 B. 5,000 C.2,851 D. 7,920 E. 7,128

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
icon
Related questions
Question
**Depreciation Calculation using the Double-Declining Balance Method**

In this exercise, a firm has purchased a new piece of equipment. Here are the financial details:

- **Purchase Cost:** $55,000
- **Estimated Useful Life:** 5 years
- **Estimated Salvage Value at Year 5:** $5,000

**Depreciation Calculation Task:**

Using the Double-Declining Balance method, determine the value of depreciation for year 5.

**Options:**

A. $2,128  
B. $5,000  
C. $2,851  
D. $7,920  
E. $7,128  

In the Double-Declining Balance method, depreciation is calculated by doubling the straight-line depreciation rate and applying it to the book value at the beginning of each year. The method does not depreciate below the salvage value. Calculate accordingly to find the correct answer.
Transcribed Image Text:**Depreciation Calculation using the Double-Declining Balance Method** In this exercise, a firm has purchased a new piece of equipment. Here are the financial details: - **Purchase Cost:** $55,000 - **Estimated Useful Life:** 5 years - **Estimated Salvage Value at Year 5:** $5,000 **Depreciation Calculation Task:** Using the Double-Declining Balance method, determine the value of depreciation for year 5. **Options:** A. $2,128 B. $5,000 C. $2,851 D. $7,920 E. $7,128 In the Double-Declining Balance method, depreciation is calculated by doubling the straight-line depreciation rate and applying it to the book value at the beginning of each year. The method does not depreciate below the salvage value. Calculate accordingly to find the correct answer.
Expert Solution
trending now

Trending now

This is a popular solution!

steps

Step by step

Solved in 3 steps with 2 images

Blurred answer
Similar questions
Recommended textbooks for you
Essentials Of Investments
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
FUNDAMENTALS OF CORPORATE FINANCE
FUNDAMENTALS OF CORPORATE FINANCE
Finance
ISBN:
9781260013962
Author:
BREALEY
Publisher:
RENT MCG
Financial Management: Theory & Practice
Financial Management: Theory & Practice
Finance
ISBN:
9781337909730
Author:
Brigham
Publisher:
Cengage
Foundations Of Finance
Foundations Of Finance
Finance
ISBN:
9780134897264
Author:
KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher:
Pearson,
Fundamentals of Financial Management (MindTap Cou…
Fundamentals of Financial Management (MindTap Cou…
Finance
ISBN:
9781337395250
Author:
Eugene F. Brigham, Joel F. Houston
Publisher:
Cengage Learning
Corporate Finance (The Mcgraw-hill/Irwin Series i…
Corporate Finance (The Mcgraw-hill/Irwin Series i…
Finance
ISBN:
9780077861759
Author:
Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor
Publisher:
McGraw-Hill Education