At the beginning of the current year a firm purchased an asset for $60,000 and estimates that it will have a useful life of five years and a salvage value of $5,000. Under the double-declining-balance method, the depreciation expense for the second year of the asset's useful life is:

Question

Quizplus · Accepted Answer

The double-declining-balance method calculates depreciation expense as a percentage of the asset's book value. The book value is the asset's cost minus the accumulated depreciation. In the first year, the depreciation expense is 20% of the asset's cost, or $12,000. In the second year, the depreciation expense is 20% of the asset's book value at the beginning of the year, which is $60,000 - $12,000 = $48,000. Therefore, the depreciation expense for the second year is $48,000 x 20% = $9,600.

At the Beginning of the Current Year a Firm Purchased