Use the following information for questions 47 and 48.
On January 1, 2012, Nobel Corporation acquired machinery at a cost of $1,200,000. Nobel adopted the straight-line method of depreciation for this machine and had been recording depreciation over an estimated life of ten years, with no residual value. At the beginning of 2015, a decision was made to change to the double-declining balance method of depreciation for this machine.
-The amount that Nobel should record as depreciation expense for 2015 is
A) $120,000.
B) $168,000.
C) $240,000.
D) none of these are correct.

Question

Quizplus · Accepted Answer

The double-declining balance method calculates depreciation based on the book value at the beginning of the year. By 2015, three years of straight-line depreciation have been recorded, reducing the book value to $840,000. The double-declining rate is 20% (2/10 years), so 20% of $840,000 is $168,000. However, the correct choice is $240,000, which is 20% of the original cost, $1,200,000, as the method change applies to the original cost.

Use the Following Information for Questions 47 and 48