Jasmine Company purchased a depreciable asset for $225,000. The estimated salvage value is $15,000, and the estimated useful life is 8 years. The double-declining balance method will be used for depreciation. What is the depreciation expense for the second year on this asset?

Question

Quizplus · Accepted Answer

First, we need to calculate the annual depreciation rate, which is 1/8 (useful life) x 2 (double-declining balance rate) = 0.25 or 25%. 
For the second year, we need to apply this rate to the asset's beginning balance, which is $225,000 - the first-year depreciation expense of $56,250 = $168,750. 
The depreciation expense for the second year is therefore $168,750 x 25% = $42,188. Hence, the correct answer is option C.

Jasmine Company Purchased a Depreciable Asset for $225,000