A company purchased factory equipment for $700000. It is estimated that the equipment will have a $70000 salvage value at the end of its estimated 5-year useful life. If the company uses the double-declining-balance method of depreciation the amount of annual depreciation recorded for the second year after purchase would be

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The double-declining-balance method of depreciation involves doubling the straight-line rate of depreciation. For equipment with a $700,000 initial cost, a $70,000 salvage value, and a 5-year useful life, the straight-line depreciation rate is 20% (100% / 5 years). Doubling this gives a 40% depreciation rate. In the first year, 40% of $700,000 is $280,000, leaving a book value of $420,000. In the second year, 40% of $420,000 is $168,000.

A Company Purchased Factory Equipment for $700000