Question

On January 1, 2019, Portly Corporation acquired equipment for $76,000. The estimated life of the equipment is 5 years or 24,000 hours. The estimated residual value is $4,000. What is the balance in Accumulated Depreciation on December 31,2019 , if Portly Corporation uses the diminishing balance depreciation method at 2 times the straight-line rate?

Select one:
a. $30,400
b. $15,200
c. $14,400
d. $28,800

Answer 1

To calculate the balance in Accumulated Depreciation, subtract the estimated residual value from the original cost to get the depreciable base. Multiply the depreciable base by the diminishing balance rate to calculate the depreciation expense for the year. The balance in Accumulated Depreciation on December 31, 2019, is equal to the depreciation expense for the year: $28,800.

Step-by-step explanation:

To calculate the balance in Accumulated Depreciation for the year, we need to determine the depreciable base of the equipment. The depreciable base is the original cost minus the estimated residual value. In this case, the depreciable base is $76,000 - $4,000 = $72,000.

The straight-line rate of depreciation is calculated as 1 / estimated life, which in this case is 1/5 = 0.2. The diminishing balance rate is twice the straight-line rate, so it is 2 * 0.2 = 0.4.

The depreciation expense for the year can be calculated by multiplying the depreciable base by the diminishing balance rate: $72,000 * 0.4 = $28,800.

The balance in Accumulated Depreciation on December 31, 2019, is equal to the depreciation expense for the year: $28,800. Therefore, the correct answer is d. $28,800.