A company purchased equipment valued at $200,000 on January 1.The equipment has an estimated useful life of six years or 5 million units.The equipment is estimated to have a salvage value of $13,400.
-Assuming the double declining balance method of depreciation,what is the book value at the end of the second year?
A) $166,667.00
B)$88,897.78
C)$96,416.25
D)$168,900.00
E)$137,800.00

Question

A company purchased equipment valued at $200,000 on January 1.The equipment has an estimated useful life of six years or 5 million units.The equipment is estimated to have a salvage value of $13,400.
-Assuming the double declining balance method of depreciation,what is the book value at the end of the second year? 
A) $166,667.00
B)$88,897.78
C)$96,416.25
D)$168,900.00
E)$137,800.00

Quizplus · Accepted Answer

The double declining balance method of depreciation calculates the depreciation expense for each year by multiplying the book value of the asset at the beginning of the year by a depreciation rate that is twice the straight-line depreciation rate. The straight-line depreciation rate is calculated by dividing the difference between the asset's cost and salvage value by its useful life.In this case, the asset's cost is $200,000, its salvage value is $13,400, and its useful life is 6 years. The straight-line depreciation rate is therefore 14.58% ([$200,000 - $13,400] / 6). The double declining balance depreciation rate is therefore 29.17% (2 * 14.58%).The book value of the asset at the end of the first year is $137,800 ($200,000 - $62,200). The depreciation expense for the second year is therefore $39,948 ($137,800 * 29.17%). The book value of the asset at the end of the second year is therefore $96,416.25 ($137,800 - $39,948).

A Company Purchased Equipment Valued at $200,000 on January 1