A long-lived asset cost $24,000 and is estimated to have a $3,000 residual value at the end of its 8-year useful life. The annual depreciation expense recorded for the third year using the double diminishing-balance method would be
A) $2,010.
B) $3,375.
C) $2,953.
D) $2,297.

Question

Quizplus · Accepted Answer

The double declining balance method accelerates depreciation, applying a constant rate to the declining book value of the asset each year. To calculate the depreciation expense for the third year, follow these steps:1. Determine the depreciation rate. Since the useful life is 8 years, the straight-line depreciation rate is 1/8, or 12.5%. For the double declining balance method, double this rate: 12.5% * 2 = 25%.2. Calculate depreciation for the first year: $24,000 * 25% = $6,000.3. Subtract the first year's depreciation from the cost to find the book value at the beginning of the second year: $24,000 - $6,000 = $18,000.4. Calculate the second year's depreciation: $18,000 * 25% = $4,500.5. Subtract the second year's depreciation from the book value at the beginning of the second year to find the book value at the beginning of the third year: $18,000 - $4,500 = $13,500.6. Calculate the third year's depreciation: $13,500 * 25% = $3,375.Therefore, the correct answer is B) $3,375.

A Long-Lived Asset Cost $24,000 and Is Estimated to Have