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Double Declining Method of Depreciation

Marsh Corporation purchased factory equipment that was installed and put into service January 2, 2004, at a total cost of $90,000. Salvage value was estimated at $6,000. The equipment is being depreciated over four years using the double-declining balance method. For the year 2005, Marsh should record depreciation expense on this equipment of
A. $21,000.
B. $22,500.
C. $42,000.
D. $45,000.

Solution Preview

To use the double declining method of depreciation, first we must find the depreciation rate.

To do this, we decide how long the asset will be depreciated. The problem tells us that we will depreciate the asset for 4 years. Divide 1/4 to get .25 or 25%. (If the depreciation was for 5 years, we would divide to get 1/5 or .20) This is the declining balance rate. ...

Solution Summary

The solution outlines how much depreciation Marsh Corporation should record using the double declining depreciation method following an equipment purchase.