Question

morten company, which uses the double-declining-balance method of depreciation, purchased a new machine on january 1, 2021. 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 2021? multiple choice $40,000 $10,000 $30,000 $20,000

Answer 1

The depreciation expense for 2021 using the double declining balance method is $40,000 (first option).

What is the depreciation expense?

Depreciation is the method that is used to expense the cost of an asset. Depreciation is when the value of an asset declines as a result of wear and tear.

The double-declining-balance method of depreciation is a depreciation method where the depreciation expense is twice its value would have been under the straight line depreciation method.

Depreciation expense using the double declining method = Depreciation factor x cost of the asset

Depreciation factor = 2 x (1/useful life)

Depreciation expense using the double declining method = (2/8) x $160,000 = $40,000.

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