On January 1, 2017, Leopard Corp.purchased a new machine for $700,000.The new machine has an estimated useful life of nine years and the residual value was estimated to be $50,000.Depreciation was calculated using the double declining-balance method.To the nearest dollar, what amount should be shown in Leopard's balance sheet at December 31, 2018, net of accumulated depreciation, for this machine?
A)$550,000
B)$445,000
C)$427,778
D)$423,457

Question

Quizplus · Accepted Answer

The double declining-balance method calculates depreciation by doubling the straight-line rate. The straight-line rate is 1/9, so the double rate is 2/9. For 2017, depreciation is $700,000 * 2/9 = $155,556. For 2018, the book value is $700,000 - $155,556 = $544,444, and depreciation is $544,444 * 2/9 = $120,987. The book value at the end of 2018 is $544,444 - $120,987 = $423,457.