Central Supply purchased a new printer for $67,500. The printer is expected to operate for nine (9) years, after which it will be sold for salvage value (estimated to be $6,750).
How much is the first year's depreciation expense if the company uses the double-declining-balance method?

Question

Quizplus · Accepted Answer

The double-declining-balance method calculates depreciation expense as a percentage of the book value of the asset. The book value is the original cost of the asset minus the accumulated depreciation. The depreciation rate is twice the straight-line depreciation rate.In this case, the original cost of the printer is $67,500 and the salvage value is $6,750. The straight-line depreciation rate is (100% - 0%) / 9 = 11.11%. The double-declining-balance depreciation rate is 2 * 11.11% = 22.22%.The first year's depreciation expense is 22.22% * $67,500 = $15,000.

Central Supply Purchased a New Printer for $67,500