Marlow Company purchased a point of sale system on January 1 for $3,400. This system has a useful life of 10 years and a salvage value of $400.
-What would be the depreciation expense for the second year of its useful life using the double-declining-balance method?

Question

Marlow Company purchased a point of sale system on January 1 for $3,400. This system has a useful life of 10 years and a salvage value of $400. 
-What would be the depreciation expense for the second year of its useful life using the double-declining-balance method?

Quizplus · Accepted Answer

The double-declining-balance method uses a depreciation rate that is double the straight-line rate. 
Straight-line rate = 1/useful life = 1/10 = 0.1 or 10% per year 
Double-declining-balance rate= 2 * straight-line rate= 2 * 0.1 = 0.2 or 20% per year 
Depreciation expense for the first year would be: 
Year 1: Book value = Cost - Depreciation expense = $3,400 - $680 (20% * $3,400) = $2,720 
Depreciation expense for the second year would be: 
Year 2: Book value = $2,720 
Depreciation expense = (Book value at the beginning of the year) * (Depreciation rate) 
Depreciation expense = $2,720 * 0.2 = $544 
Therefore, the depreciation expense for the second year of its useful life using the double-declining-balance method would be $544.

Marlow Company Purchased a Point of Sale System on January