On January 1 a machine with a useful life of five years and a residual value of $30000 was purchased for $90000. What is the depreciation expense for year 2 under the double-declining-balance method of depreciation?
A) $21600
B) $36000
C) $28800
D) $17280

Question

Quizplus · Accepted Answer

The double-declining-balance method of depreciation results in a depreciation expense that is twice the straight-line depreciation expense. The straight-line depreciation expense is calculated by dividing the depreciable cost of the asset by its useful life. The depreciable cost of the asset is the cost of the asset minus its residual value. In this case, the depreciable cost of the asset is $90000 - $30000 = $60000. The useful life of the asset is five years. Therefore, the straight-line depreciation expense is $60000 / 5 = $12000. The double-declining-balance depreciation expense is twice the straight-line depreciation expense, or $12000 * 2 = $24000. However, the depreciation expense cannot exceed the depreciable cost of the asset. In this case, the depreciable cost of the asset is $60000. Therefore, the depreciation expense for year 2 is $24000.

On January 1 a Machine with a Useful Life of Five