On January 1 of this year,SportsWorld purchased a new cash register for $5,400.This register has a useful life of 10 years and a residual value of $400.Using the double-declining-balance method,how much depreciation expense should SportsWorld recognize for next year?

Question

Quizplus · Accepted Answer

To use the double-declining-balance method, we need to first calculate the straight-line depreciation rate:

Straight-line depreciation rate = (Cost - Residual value) / Useful life
Straight-line depreciation rate = ($5,400 - $400) / 10 years
Straight-line depreciation rate = $5,000 / 10 years
Straight-line depreciation rate = $500 per year

The double-declining-balance rate is twice the straight-line depreciation rate:

Double-declining-balance rate = 2 * Straight-line depreciation rate
Double-declining-balance rate = 2 * $500
Double-declining-balance rate = $1,000 per year

Now we can use this rate to calculate the depreciation expense for next year:

Depreciation expense = Book value at beginning of year * Double-declining-balance rate
Book value at beginning of year = Cost - Accumulated depreciation
Book value at beginning of year = $5,400 - $1,000
Book value at beginning of year = $4,400

Depreciation expense = $4,400 * $1,000 / $5,400
Depreciation expense = $864

Therefore, the correct answer is D) $864.

On January 1 of This Year,SportsWorld Purchased a New Cash