On January 1, 2017, Grove City Corp. purchased a ship for $2,000,000. It has a ten-year useful life and a residual value of $50,000. The company uses the double-declining-balance method.
-If Grove City Corp.continues to use the ship in its eleventh year,what is the correct accounting procedure?
A)Take the asset off the books and record a gain on the disposal.
B)Continue to depreciate it.
C)The company may not use it any longer.
D)No longer depreciate it but leave it on the records at its book value at the end of its useful life.

Question

Quizplus · Accepted Answer

Under the double-declining-balance method, depreciation is accelerated, but the asset cannot be depreciated below its residual value. Once the asset's book value reaches its residual value, depreciation ceases, but the asset remains on the books at its residual value until it is disposed of.