Tafty Company purchased specialized equipment on April 1 201

Tafty Company purchased specialized equipment on April 1, 2012, that cost $600,000, has a residual value of $40,000, and a useful life of four years. The amount of depreciation expense for 2012, under the double declining balance method is: $225,000. $210,000. $3po,ooo. $140,000. hone of the above.

Solution

Answer is $225,000

Explanation

Depreciation rate under double declining method =2 * Straight line depreciation rate

= 2 *25%

= 50%

If life of the asset is 4 years, straight line depreciation rate is 25%

Depreciation for the year 2012= 600,000*50%*9/12

= $225,000  

Equipment used for 9 months only, so proportionate need to be considered.