On January 1, 2013, a machine with a useful life of five years and a residual value of $2,500 was purchased for $25,000. Using the double-declining-balance method, the depreciation expense for the year ending December 31, 2014 would be
A) $5,400
B) $10,000
C) $9,000
D) $6,000

Question

Quizplus · Accepted Answer

Step 1: Calculate the depreciation rate
Depreciation rate = 2 / useful life (in years)
Depreciation rate = 2 / 5 = 0.4 or 40%

Step 2: Calculate the annual depreciation expense using double-declining-balance method
First year depreciation expense = (Cost of the asset - Accumulated depreciation) x Depreciation rate
First year depreciation expense = ($25,000 - $0) x 40%
First year depreciation expense = $10,000

Second year depreciation expense = (Cost of the asset - Accumulated depreciation) x Depreciation rate
Second year depreciation expense = ($25,000 - $10,000) x 40%
Second year depreciation expense = $6,000

Therefore, the depreciation expense for the year ending December 31, 2014 would be $6,000 (Option D).

On January 1, 2013, a Machine with a Useful Life