Lloyd Company purchased a depreciable asset for £1,360,000.The estimated salvage value is £360,000, 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

The double-declining balance method calculates depreciation by doubling the straight-line rate. The straight-line rate is 1/8 = 12.5%, so the double rate is 25%. First-year depreciation: £1,360,000 * 25% = £340,000. Second-year depreciation: (£1,360,000 - £340,000) * 25% = £255,000.

Lloyd Company Purchased a Depreciable Asset for £1,360,000