* 205. A company purchased factory equipment for $350,000. It is estimated that the equipment will have a $35,000 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

Question

Quizplus · Accepted Answer

The double-declining-balance method of depreciation results in a higher depreciation expense in the early years of an asset's life. The depreciation rate is twice the straight-line rate. In this case, the straight-line depreciation rate would be 10% ($350,000 - $35,000) / 5 years = $63,000 / 5 years = 10%. The double-declining-balance depreciation rate would be 20%. The depreciation expense for the second year would be $350,000 x 20% = $70,000.

* 205 a Company Purchased Factory Equipment for $350,000