Beynon Corp.purchased office equipment for $20,000, with an estimated residual value of $4,000 at the end of its 8-year useful life.Assuming the double diminishing-balance method is used, the constant percentage to be applied against the carrying amount each year is
A)10%.
B)12.5%.
C)25%.
D)not determinable.

Question

Quizplus · Accepted Answer

The double diminishing-balance method uses twice the straight-line rate. The straight-line rate is 100% divided by the useful life (8 years), which is 12.5%. Therefore, the double diminishing-balance rate is 25% (2 x 12.5%).