On January 1, 2018, a machine with a useful life of five years and a residual value of $2,500 was purchased for $25,000. Using the double diminishing-balance method, the depreciation expense for the year ending December 31, 2019 would be
A) $10,000.
B) $ 9,000.
C) $ 6,000.
D) $ 5,400.

Question

Quizplus · Accepted Answer

The double diminishing-balance method calculates depreciation by applying a constant rate to the declining book value. The rate is double the straight-line rate, which is 40% for a 5-year life. For 2018, depreciation is $25,000 * 40% = $10,000. The book value at the start of 2019 is $15,000. Depreciation for 2019 is $15,000 * 40% = $6,000.

On January 1, 2018, a Machine with a Useful Life