A company purchased a cash register on January 1 for $5,400. This register has a useful life of 10 years and a residual value of $400. What would be the depreciation expense for the second year of its useful life using the double-declining-balance method?

Question

Quizplus · Accepted Answer

Using the double-declining-balance method, we first calculate the depreciation rate by dividing 1 by the useful life of the asset, and then multiplying it by 2.

Depreciation rate = (1/10) x 2 = 0.2 or 20%

For the second year, we start with the beginning book value, which is the cost of the asset minus the accumulated depreciation from the previous year.

Beginning book value = $5,400 - ($5,400 x 0.2) = $4,320

Depreciation expense for the second year = $4,320 x 0.2 = $864

Therefore, the correct answer is C, $864.

A Company Purchased a Cash Register on January 1 for $5,400