Seneca Valley owns a machine that it purchased on Jan 1, 2019 for $600,000. The machine had an estimated useful life of 10 years and an estimated residual value of $100,000. The company uses the double-declining balance method. The machine was sold on December 31, 2021 for $140,000. What is the depreciation rate for 2019?

Question

Quizplus · Accepted Answer

The double-declining balance method is a depreciation method that produces a higher depreciation expense in the earlier years and lower depreciation expense in later years. To calculate the depreciation rate, we divide 1 by the useful life of the asset, which in this case is 10 years. Double-declining balance method doubles the straight-line rate, so the annual depreciation rate for the machine is 20% (2 x 10%). Therefore, the depreciation rate for 2019 would also be 20%.

Seneca Valley Owns a Machine That It Purchased on Jan