Halltown Company purchased a depreciable asset for $450,000. The estimated salvage value is $30,000, 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:
Annual depreciation rate = 2 / useful life in years = 2 / 8 = 0.25
Second, we need to calculate the depreciation expense for the first year:
Depreciation expense for the first year = (asset cost - salvage value) x annual depreciation rate
Depreciation expense for the first year = ($450,000 - $30,000) x 0.25 = $105,000
Finally, we can calculate the depreciation expense for the second year:
Depreciation expense for the second year = (asset cost - accumulated depreciation - salvage value) x annual depreciation rate
Depreciation expense for the second year = ($450,000 - $105,000 - $30,000) x 0.25 = $84,375

Halltown Company Purchased a Depreciable Asset for $450,000