Salta Company installs a manufacturing machine in its factory at the beginning of the year at a cost of $87,000. The machine's useful life is estimated to be 5 years, or 400,000 units of product, with a $7,000 residual value. During its second year, the machine produces 84,500 units of product. Determine the machines' second year depreciation under the double-declining-balance method.
A) $16,900.
B) $16,000.
C) $17,400.
D) $18,379.
E) $20,880.

Question

Quizplus · Accepted Answer

The double-declining-balance method calculates depreciation by doubling the straight-line rate. The straight-line rate is 1/5 = 20%, so double is 40%. First-year depreciation is 40% of $87,000 = $34,800. Second-year depreciation is 40% of ($87,000 - $34,800) = $20,880.

Salta Company Installs a Manufacturing Machine in Its Factory at the Beginning