Norwood, Inc. purchased a crane at a cost of $80,000. The crane has an estimated residual value of $5,000 and an estimated life of 8 years, or 12,500 hours of operation. The crane was purchased on January 1, 2016 and was used 2,700 hours in 2016 and 2,600 hours in 2017. If Norwood uses the double-declining-balance depreciation method, what amount is the depreciation expense for 2017? a.$20,000b.$15,000c.$14,063d.$18,750

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Business

Justine Mckee

31 May, 20:36

Norwood, Inc. purchased a crane at a cost of $80,000. The crane has an estimated residual value of $5,000 and an estimated life of 8 years, or 12,500 hours of operation. The crane was purchased on January 1, 2016 and was used 2,700 hours in 2016 and 2,600 hours in 2017. If Norwood uses the double-declining-balance depreciation method, what amount is the depreciation expense for 2017? a.$20,000b.$15,000c.$14,063d.$18,750

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Karla Edwards · Answer 1

Depreciation for 2017 = $ 15000.

Explanation:

Asset cost = 80000

residual value = 5000

estimated life = 8 years.

As we know that:

Double declining depreciation = 2 * cost of assets * depreciation rate.

Depreciation rate = 1 / useful life of asset = 1 / 8 =.125 = 12.5%.

Depreciation of 2016 = 2 * 80000 * 12.5% = 20000

Depreciation of 2017 = (80000-20000 = 60000*2*12.5% = 15000)