Martin Company purchases a machine at the beginning of the year at a cost of $60,000.The machine is depreciated using the double-declining-balance method.The machine's useful life is estimated to be 4 years with a $5,000 salvage value.Depreciation expense in year 4 is:
A)$13,750.
B)$3,750.
C)$30,000.
D)$2,500.
E)$5,000.

Question

Quizplus · Accepted Answer

In the double-declining-balance method, the depreciation rate is double the straight-line rate. For a 4-year life, the straight-line rate is 25%, so the double rate is 50%. Year 1 depreciation is $30,000, Year 2 is $15,000, Year 3 is $7,500, and Year 4 is $2,500, ensuring the book value does not drop below the salvage value.

Martin Company Purchases a Machine at the Beginning of the Year