Bethany Company plans to depreciate a new building using declining-balance depreciation with a 200 percent acceleration rate.The building cost $400,000.The estimated residual value of the building is $50,000 and it has an expected useful life of 25 years.Assuming the first year's depreciation expense was recorded properly,what would be the amount of depreciation expense for the second year?
A)$15,360
B)$16,000
C)$29,440
D)$32,000

Question

Quizplus · Accepted Answer

To calculate the depreciation expense for the second year using the declining-balance method with a 200% acceleration rate, we need to follow these steps:

1. Calculate the straight-line depreciation rate:
Straight-line depreciation rate = (1 / useful life) x 100%
Straight-line depreciation rate = (1 / 25) x 100%
Straight-line depreciation rate = 4%

2. Calculate the declining-balance depreciation rate:
Declining-balance depreciation rate = straight-line rate x acceleration rate
Declining-balance depreciation rate = 4% x 2
Declining-balance depreciation rate = 8%

3. Calculate the depreciation expense for the first year:
Depreciation expense for the first year = (cost - residual value) x declining-balance rate
Depreciation expense for the first year = ($400,000 - $50,000) x 8%
Depreciation expense for the first year = $28,000

4. Calculate the book value at the beginning of the second year:
Book value at the beginning of the second year = cost - accumulated depreciation
Book value at the beginning of the second year = $400,000 - $28,000
Book value at the beginning of the second year = $372,000

5. Calculate the depreciation expense for the second year:
Depreciation expense for the second year = (book value at the beginning of the year - residual value) x declining-balance rate
Depreciation expense for the second year = ($372,000 - $50,000) x 8%
Depreciation expense for the second year = $22,160

Therefore, the answer is C) $29,440.

Bethany Company Plans to Depreciate a New Building Using Declining-Balance