On January 1, a machine with a useful life of five years and a residual value of $25,000 was purchased for $75,000.What is the depreciation expense for year 2 under the double-declining-balance method of depreciation?

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Quizplus · Accepted Answer

The double-declining-balance method of depreciation results in a constant depreciation rate over the asset's useful life. The depreciation rate is twice the straight-line depreciation rate. The straight-line depreciation rate is calculated by dividing the depreciable cost of the asset by its useful life. The depreciable cost of the asset is the difference between its purchase price and its residual value.In this case, the depreciable cost of the asset is $75,000 - $25,000 = $50,000. The useful life of the asset is 5 years. Therefore, the straight-line depreciation rate is 10%. The double-declining-balance depreciation rate is 20%.The depreciation expense for year 2 is calculated by multiplying the book value of the asset at the beginning of the year by the depreciation rate. The book value of the asset at the beginning of year 2 is $75,000 - $18,000 = $57,000. Therefore, the depreciation expense for year 2 is $57,000 x 20% = $11,400.

On January 1, a Machine with a Useful Life of Five