Beckman Enterprises purchased a depreciable asset on October 1, Year 1 at a cost of $100,000. The asset is expected to have a salvage value of $20,000 at the end of its five-year useful life. If the asset is depreciated on the double-declining-balance method, the asset's book value on December 31, Year 2 will be:

Question

Quizplus · Accepted Answer

The double-declining-balance method involves depreciating the asset at twice the straight-line rate. The straight-line rate is 20% (1/5 years), so the double rate is 40%. For Year 1, depreciation is $100,000 * 40% * 3/12 = $10,000. The book value at the end of Year 1 is $90,000. For Year 2, depreciation is $90,000 * 40% = $36,000. The book value at the end of Year 2 is $90,000 - $36,000 = $54,000.

Beckman Enterprises Purchased a Depreciable Asset on October 1, Year