On January 1,2011,Ace Electronics paid $400,000 cash for a computer that would be used to store and process its accounting information.The computer has a 5-year useful life,after which it will be worthless because it will be obsolete.Ace Electronics uses the double-declining balance method to depreciate its assets.The book value of the computer at December 31,2012 is ________.

Question

Quizplus · Accepted Answer

The double-declining balance method involves depreciating the asset at twice the straight-line rate. For a 5-year life, the straight-line rate is 20%, so the double-declining rate is 40%. In the first year, depreciation is $160,000 (40% of $400,000), leaving a book value of $240,000. In the second year, depreciation is $96,000 (40% of $240,000), leaving a book value of $144,000.

On January 1,2011,Ace Electronics Paid $400,000 Cash for a Computer