The cost of an asset is $1,070,000, and its residual value is $220,000. Estimated useful life of the asset is ten years. Calculate depreciation for the first year using the double-declining-balance method of depreciation. (Do not round any intermediate calculations, and round your final answer to the nearest dollar.)

Question

Quizplus · Accepted Answer

1. Calculate the depreciation rate:

Depreciation rate = 2 / Useful life = 2 / 10 = 0.2 or 20%

2. Calculate the depreciation expense for the first year:

Depreciation expense (Year 1) = Book value at beginning of year * Depreciation rate

Book value at beginning of year = Cost - Accumulated depreciation (Year 0) 
= $1,070,000 - $0 = $1,070,000

Depreciation expense (Year 1) = $1,070,000 * 20% 
= $214,000

Therefore, the answer is B.

The Cost of an Asset Is $1,070,000, and Its Residual