A machine was purchased on January 1 for $100,000. The machine has an estimated useful life of 5 years with a salvage value of $10,000. Under the double-declining-balance method, depreciation expense for each of the first two years is, respectively,

Question

Quizplus · Accepted Answer

Under the double-declining-balance method, depreciation rate is twice the straight-line rate. The straight-line rate is 1/5 or 20%. Thus, the double-declining-balance rate is 40%.

Depreciation expense for the first year = $100,000 x 40% = $40,000
Book value at the end of the first year = $100,000 - $40,000 = $60,000

Depreciation expense for the second year = $60,000 x 40% = $24,000
Book value at the end of the second year = $60,000 - $24,000 = $36,000

Therefore, the correct choice is B, as it gives the correct depreciation expense for each year.

A Machine Was Purchased on January 1 for $100,000