Marlow Company purchased a point of sale system on January 1 for $3,400.This system has a useful life of 10 years and a salvage value of $400.What would be the book value of the asset at the end of the first year of its useful life using the double-declining-balance method?
A)$680.
B)$2,320.
C)$2,720.
D)$600.
E)$300.

Question

Quizplus · Accepted Answer

To use the double-declining-balance method, we need to first calculate the straight-line depreciation rate. This is done by subtracting the salvage value from the cost, and then dividing that by the useful life:

($3,400 - $400) / 10 years = $300 per year

The double-declining-balance rate is twice this amount, or $600 per year. To calculate the book value at the end of the first year, we multiply this rate by the asset's beginning book value:

Year 1 depreciation = $600 x $3,400 = $2,040
Book value at end of Year 1 = $3,400 - $2,040 = $1,360

This process would continue for subsequent years until the salvage value is reached.

Marlow Company Purchased a Point of Sale System on January