Question

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

Answer 1

Book value= $206,400

Step-by-step 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