Pebble Beach Co. buys a piece of equipment for $56,000. The equipment has a useful life of seven years. No residual value is expected at the end of the useful life. Using the double-declining-balance method, what is the company's depreciation expense in the first year of the equipment's useful life?

The company's depreciation expense in the first year of the equipment's useful life is $ 16,004.8.

Explanation:

Determining the depreciable amount.

The depreciable amount = Asset acquisition - Salvage value

The depreciable amount = 56,000 - 0.

The depreciable amount = $56,000.

Determining the annual depreciation amount.

The annual depreciation amount = depreciable amount : number of useful life.

The annual depreciation amount = 56,000 : 7.

The annual depreciation amount = $8,000.

Determining the % depreciation rate.

The % depreciation rate = (annual depreciation amount / the depreciable amount) * 100.

The % depreciation rate = (8,000 / 56,000) * 100.

The % depreciation rate = 14.29%

Since its double declining rate, we multiply the % rate by 2.

The % depreciation rate is therefore = 28.58%

Determining the depreciation expense for year 1.

The depreciation expense for year 1 = Carrying value of asset * depreciation % rate.

The depreciation expense for year 1 = 56,000 * 28.58%

The depreciation expense for year 1 = $ 16,004.8