* 205.A company purchased factory equipment for $450,000.It is estimated that the equipment will have a $45,000 salvage value at the end of its estimated 5-year useful life.If the company uses the double-declining-balance method of depreciation, the amount of annual depreciation recorded for the second year after purchase would be
A)$180,000.
B)$108,000.
C)$162,000.
D)$97,200.

Question

Quizplus · Accepted Answer

The double-declining-balance method of depreciation results in a constant depreciation rate over the asset's useful life. The depreciation rate is twice the straight-line depreciation rate. In this case, the straight-line depreciation rate is 10% ($450,000 - $45,000) / 5 years = $81,000 / 5 years = 10%. The double-declining-balance depreciation rate is 20%. The amount of annual depreciation recorded for the second year after purchase would be $450,000 x 20% = $90,000.

* 205A Company Purchased Factory Equipment for $450,000