Underwood Company purchased a machine on January 2,2013,for $1,000,000.The machine has an estimated useful life of five years and a salvage value of $100,000.Depreciation was computed by the 150% declining-balance method.The accumulated depreciation balance at December 31,2014,should be
A) $360,000.
B) $459,000.
C) $490,000.
D) $510,000.

Question

Quizplus · Accepted Answer

To calculate depreciation using 150% declining-balance method, the annual depreciation rate is = 150% / useful life in years. 
Here, the annual depreciation rate = 150% / 5 = 30%.

The depreciation for the first year = $1,000,000 x 30% = $300,000
Thus, the book value of the asset at the end of the first year = $1,000,000 - $300,000 = $700,000.

The depreciation for the second year is also calculated on the reduced balance of $700,000. 
Depreciation for the second year = $700,000 x 30% = $210,000

Accumulated depreciation at the end of the second year = $300,000 + $210,000 = $510,000

Therefore, the accumulated depreciation balance at December 31, 2014, should be $510,000. The correct answer is D.

Underwood Company Purchased a Machine on January 2,2013,for $1,000,000