A firm purchases an asset for $50,000 and estimates that it will have a useful life of five years and a salvage value of $5,000.Under the double-declining-balance method,the depreciation expense for the second year of the asset's useful life is

Question

Quizplus · Accepted Answer

Under the double-declining-balance method, the depreciation rate is twice the straight-line rate.

Straight-line rate = (Cost - Salvage value) / Useful life
= ($50,000 - $5,000) / 5 years
= $9,000 per year

Double-declining-balance rate = 2 * Straight-line rate
= 2 * $9,000
= $18,000 per year

Depreciation expense for the second year = Beginning book value * Depreciation rate
= ($50,000 - $18,000) * $18,000
= $12,000

Therefore, the answer is B, $12,000.

A Firm Purchases an Asset for $50,000 and Estimates That