A machine is purchased on January 1, 2012, for $72,000 cash. The machine has an estimated useful life of 8 years and a salvage value of $17,200. If the double-declining-balance method of depreciation is used, what will be the machine's book value as of December 31, 2013?

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Quizplus · Accepted Answer

The double-declining-balance method involves depreciating the asset at twice the straight-line rate. The straight-line rate is 1/8 = 12.5%, so the double rate is 25%. For 2012, depreciation is $72,000 * 25% = $18,000, leaving a book value of $54,000. For 2013, depreciation is $54,000 * 25% = $13,500, leaving a book value of $40,500.

A Machine Is Purchased on January 1, 2012, for $72,000