On January 2,2014,Helmkamp Company purchased a $10,000 machine.It had an estimated useful life of 5 years and a residual value of $1,000.What is the amount of depreciation expense for 2015,the second year of the asset's life using the double declining-balance method?

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Quizplus · Accepted Answer

Depreciation expense for the second year using double-declining-balance method is $2,400. The double-declining-balance method multiplies the book value of the asset at the beginning of the year by twice the straight-line depreciation rate. The straight-line depreciation rate is calculated by dividing the depreciable cost of the asset by its useful life. In this case, the depreciable cost is $10,000 - $1,000 = $9,000 and the useful life is 5 years. Therefore, the straight-line depreciation rate is 20%. The double-declining-balance depreciation rate is 40%. The book value of the asset at the beginning of the second year is $10,000 - $2,000 = $8,000. Therefore, the depreciation expense for the second year is $8,000 x 40% = $2,400.

On January 2,2014,Helmkamp Company Purchased a $10,000 Machine