A water pump that costs $25,000 is depreciated using the double-declining-balance method. Which of the following is the depreciation expense for Year 1 if the depreciation rate as per straight-line method is 20%?
A) $10,000
B) $20,000
C) $5,000
D) $9,000

Question

Quizplus · Accepted Answer

The double-declining-balance method accelerates depreciation by applying double the straight-line depreciation rate. Here, the straight-line rate is 20%, so the double-declining rate is 40%. Applying this to the initial cost of $25,000 gives a Year 1 depreciation of $25,000 * 40% = $10,000.

A Water Pump That Costs $25,000 Is Depreciated Using the Double-Declining-Balance