Warren Company plans to depreciate a new building using the double declining-balance depreciation method. The building cost $800,000. The estimated residual value of the building is $50,000 and it has an expected useful life of 25 years. What is the building's book value at the end of the first year?
A)$736,000.
B)$768,000.
C)$686,000.
D)$690,000.

Question

Quizplus · Accepted Answer

The double declining-balance method calculates depreciation by doubling the straight-line rate. The straight-line rate is 1/25 = 4%. Double that is 8%. First-year depreciation is 8% of $800,000 = $64,000. Book value at the end of the first year is $800,000 - $64,000 = $736,000.

Warren Company Plans to Depreciate a New Building Using the Double