Accounting Help!! accumulated depreciation..?

Question

Ok here's my problem. Please help me solve it if you know how! I'm in a mid-life crisis!!

Use the following information to answer the next 4 questions:

Leena Company purchased equipment on January 1, 2006 for $55,000. It is estimated that the equipment will have a $5,000 salvage value at the end of its 4 year useful life. It is also estimated the equipment will produce 100,000 units over its lifetime. Actual production was 16,000 units in year 1, 24,000 units in year 2 and 20,000 units in year 3.

What is the ACCUMULATED DEPRECIATION at the end of year 2 using the double declining balance method?

Answer 1

You don't include salvage value or units of production in the calculation for DDB, so disregard that information.

The depreciation expense will equal 2/x * carrying value of the asset, where x is the estimated useful life and the carrying value equals the original cost minus accumulated depreciation taken.

Year 1: 2/4 (55,000 - 0) = 27,500

Year 2: 2/4 (55,000 - 27,500) = 13,750

So the accumulated depreciation at the end of year 2 will be the sum of the 2 years' expenses -> 27,500 + 13,750 = $41,250.

Hope this helps!