A machine is purchased on January 1, 2011, for $90,000. It is expected to have a useful life of five years and a residual value of $5,000. The company closes its books on December 31. Under the double-declining balance method, what is the total amount of depreciation to be expensed during the 2012 fiscal year (year 2 of 5)?
A) $21,600
B) $22,000
C) $22,400
D) $34,000

Question

Quizplus · Accepted Answer

The double-declining balance method calculates depreciation by doubling the straight-line rate. The straight-line rate is 1/5 = 20%, so the double-declining rate is 40%. In 2011, depreciation is 40% of $90,000 = $36,000. The book value at the start of 2012 is $90,000 - $36,000 = $54,000. Depreciation for 2012 is 40% of $54,000 = $21,600.

A Machine Is Purchased on January 1, 2011, for $90,000