Equipment is purchased for $120,000.It has a five-year useful life and a $20,000 residual value.Under the double-declining-balance method,what is the depreciation expense for year 3?
A) $17,280
B) $15,360
C) $14,400
D) $12,800

Question

Quizplus · Accepted Answer

The double-declining-balance method calculates depreciation expense as a percentage of the book value of the asset. The book value is the original cost of the asset minus the accumulated depreciation. For the first year, the depreciation expense is 40% of the original cost, or $48,000. For the second year, the depreciation expense is 40% of the book value at the beginning of the year, or $33,600. For the third year, the depreciation expense is 40% of the book value at the beginning of the year, or $23,040.

Equipment Is Purchased for $120,000