Moreno Company purchased equipment for $450,000 on January 1, 2010, and will usethe double-declining-balance method of depreciation. It is estimated that the equipment will have a 3-year life and a $20,000 salvage value at the end of its useful life. The amount of depreciation expense recognized in the year 2012 will be

Depreciation expense 2012 = $31,851.85

Explanation:

Giving the following information:

Moreno Company purchased equipment for $450,000 on January 1, 2010. It is estimated that the equipment will have a 3-year life and a $20,000 salvage value at the end of its useful life.

To calculate the depreciation expense under the double-declining balance, we need to use the following formula for each year:

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

2010 = 2*[ (450,000 - 20,000) / 3] = 286,666.67

2011 = 2*[ (430,000 - 286,666.67) / 3] = 95,555.55

2012 = 2*[ (143,333.33 - 95,555.55) / 3] = $31,851.85