Cost of an asset is $1,000,000 and its residual value is $100,000. Estimated useful life of the asset is four years. Calculate depreciation for the second year using the double-declining-balance method of depreciation.

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Quizplus · Accepted Answer

The double-declining-balance method calculates depreciation by doubling the straight-line rate. The straight-line rate is 1/4 = 25%, so double is 50%. First-year depreciation: $1,000,000 * 50% = $500,000. Second-year depreciation: ($1,000,000 - $500,000) * 50% = $250,000.

Cost of an Asset Is $1,000,000 and Its Residual Value