Madison, Inc., purchased equipment at a cost of $84,000. The equipment has an es
ID: 2416550 • Letter: M
Question
Madison, Inc., purchased equipment at a cost of $84,000. The equipment has an estimated residual value of $12,000 and an estimated life of 6 years, or 10,000 hours of operation. The equipment was purchased on January 1, 2004. During the first year of operation, it was used for 1,500 hours.
Refer to Madison, Inc.-Equipment. If Madison uses the double declining-balance depreciation method, how much is depreciation expense for 2005?
$16,000
$18,667
$24,000
$28,000
a.$16,000
b.$18,667
c.$24,000
d.$28,000
Explanation / Answer
Answer (d) $28000
Depreciation Rate= (2*(84000/6))/84000 Depreciation Rate = 28000/84000 Depreciation Rate = 33.33% Depreciation= 84000*33.33% Depreciation= 28000