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On January 1, 2021, the Allegheny Corporation purchased equipment for $150,000. The estimated service life of the equipment is 10 years and the estimated residual value is $18,000. The equipment is expected to produce 240,000 units during its life. Required: Calculate depreciation for 2021 and 2022 using each of the following methods. 2. Double-declining-balance.

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Answer:

Results are below.

Explanation:

Giving the following information:

Purchase price= $150,000

Useful life= 10 years

Salvage value= $18,000

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

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

2021:

Annual depreciation= 2*[(150,000 - 18,000) / 10]

Annual depreciation= $26,400

2022:

Annual depreciation= 2*[(132,000 - 26,400) / 10*

Annual depreciation= $21,120