Mitchell Corporation bought equipment on January 1, 2017, and depreciates it using the double declining-balance-method of depreciation. The equipment cost $300,000 and had an expected salvage value of $40,000. The life of the equipment was estimated to be 10 years. The book value of the equipment at the beginning of the third year would be

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Business

Moore

2 September, 01:55

Mitchell Corporation bought equipment on January 1, 2017, and depreciates it using the double declining-balance-method of depreciation. The equipment cost $300,000 and had an expected salvage value of $40,000. The life of the equipment was estimated to be 10 years. The book value of the equipment at the beginning of the third year would be

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Jennifer Bradford · Answer 1

Book value = $206,400

Explanation:

Giving the following information:

The equipment cost $300,000 and had an expected salvage value of $40,000.

First, we need to calculate the accumulated depreciation:

Annual depreciation = 2*[ (book value) / estimated life (years) ]

Year 1 = 2*[ (300,000 - 40,000) / 10] = 52,000

Year 2 = 2*[ (260,000 - 52,000) / 10] = 41,600

Book value = purchase price - accumulated depreciation

Book value = 300,000 - 93,600 = $206,400