On January 1, a machine with a useful life of five years and a residual value of $30,000 was purchased for $90,000.What is the depreciation expense for year two under the double-declining-balance method of depreciation?

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The double-declining-balance method of depreciation involves doubling the straight-line rate of depreciation. For a machine with a useful life of 5 years, the straight-line depreciation rate is 1/5 (or 20%) per year. Doubling this rate gives a depreciation rate of 40% per year under the double-declining-balance method. In the first year, the depreciation expense is 40% of $90,000, which is $36,000. This reduces the book value of the machine to $54,000 ($90,000 - $36,000). In the second year, the depreciation expense is 40% of this new book value, which is 40% of $54,000, equaling $21,600.

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