A company purchased equipment valued at $200,000 on January 1.The equipment has an estimated useful life of six years or five million units.The equipment is estimated to have a salvage value of $13,400.Assuming the double declining balance method of depreciation,what is the annual depreciation for the second year if 1.5 million units were produced?
A)$41,445.91
B)$62,137.80
C)$31,100.00
D)$55,980.00
E)$44,422.20

Question

Quizplus · Accepted Answer

The double declining balance method calculates depreciation by doubling the straight-line rate. The straight-line rate is 1/6 (useful life), so the double rate is 2/6 or 1/3. First-year depreciation is $200,000 * 1/3 = $66,666.67. The second-year depreciation is calculated on the book value after the first year: ($200,000 - $66,666.67) * 1/3 = $44,422.20.

A Company Purchased Equipment Valued at $200,000 on January 1