Sure Company purchased a machine on January 1,20A,at a cash cost of $12,000.The estimated useful life is 10 years,and the estimated residual value is $3,000.The company will use the declining-balance method based on a 150 percent acceleration rate.What will be the depreciation expense for the second year?
A)$900
B)$1,350
C)$1,530
D)$1,800

Question

Quizplus · Accepted Answer

To calculate the declining-balance depreciation expense for the second year, we first need to calculate the depreciation rate.

The formula for the declining-balance depreciation rate is:

Depreciation rate = Acceleration rate x straight-line depreciation rate

The straight-line depreciation rate is calculated as follows:

Straight-line depreciation rate = (Cost - Residual value) / Useful life

Straight-line depreciation rate = ($12,000 - $3,000) / 10 years = $900

Acceleration rate is given as 150%, which means depreciation will be 1.5 times higher than straight-line depreciation.

Acceleration rate = 150% = 1.5

Depreciation rate = 1.5 x $900 = $1350

Therefore, the depreciation expense for the second year will be $1,350.

The correct choice is C.

Sure Company Purchased a Machine on January 1,20A,at a Cash