Equipment was purchased for $30,000.It has a useful life of 5 years and a residual value of $4,000.What is depreciation expense for year two under the double-declining-balance method?
A)$5,200
B)$6,000
C)$6,240
D)$7,200

Question

Quizplus · Accepted Answer

The double-declining-balance method calculates depreciation by doubling the straight-line rate. The straight-line rate is 1/5 or 20%, so double is 40%. Year 1 depreciation is 40% of $30,000 = $12,000. Year 2 depreciation is 40% of ($30,000 - $12,000) = $7,200.

Equipment Was Purchased for $30,000