Double-Declining Balance Depreciation

1. On January 1, the Rhode Island Redbirds organization purchased new workout equipment for its athletes. The equipment had a cost of $15,600, transportation costs of $450, and set up costs of $290. The Redbirds spent $350 training their trainers and athletes on its proper use. The useful life of the equipment is five years and has no residual value. How much depreciation expense should the Redbirds take in the first year, if straight-line is being used?

a. $3,120

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b. $3,268

c. $3,338

d. $3,210

2. See the information in number 1 above. Assume the Redbirds decide to use the double-declining balance depreciation method instead. What would Year 1 depreciation expense be?

a. $6,420

b. $6,676

c. $6,240

d. $6,536

3. Kite Corporation wishes to trade equipment it owns for a vehicle owned by the Runner Corporation. Kite’s equipment has a book value of $4,000 and a fair value of $4,500. Runner’s vehicle has a book value and fair value of $5,100. Kite agrees to pay Runner $600 in cash in addition to giving up the equipment. What would be Kite’s gain or loss on this exchange?

a. $500

b. $100

c. $1,100

d. $600