A company buys a piece of equipment for $48,000.The equipment has a useful life of ten years.Using the double-declining-balance method,the company's amortization expense in the first year would be:

Question

Quizplus · Accepted Answer

The double-declining-balance method multiplies the book value of the asset by a rate that is twice the straight-line depreciation rate. The straight-line depreciation rate is calculated by dividing 100% by the useful life of the asset. In this case, the useful life is 10 years, so the straight-line depreciation rate is 10%. The double-declining-balance rate is therefore 20%.The book value of the asset in the first year is $48,000. Multiplying this by the double-declining-balance rate of 20% gives an amortization expense of $9,600.

A Company Buys a Piece of Equipment for $48,000