Use the following information for the next questions 104 and 105.
A corporation using the double-declining-balance method of depreciation purchased a new machine on January 1, 2016.The machine cost $200,000, had an estimated useful life of 8 years and $25,000 residual value at the end of its useful life.
-Use the information above to answer the following question.What is the depreciation expense for 2016?
A) $25,000
B) $50,000
C) $12,500
D) $37,500

Question

Quizplus · Accepted Answer

To calculate the depreciation expense for 2016 using double-declining-balance method, we need to follow these steps:

1. Determine the straight-line depreciation rate:

Straight-line depreciation rate = 100% / Useful life

Straight-line depreciation rate = 100% / 8 = 12.5%

2. Determine the double-declining-balance rate:

Double-declining-balance rate = Straight-line depreciation rate x 2

Double-declining-balance rate = 12.5% x 2 = 25%

3. Calculate the depreciation expense for 2016:

Depreciation expense for 2016 = Beginning book value x Double-declining-balance rate

Beginning book value = Cost - Accumulated depreciation
Beginning book value = $200,000 - $0 = $200,000

Depreciation expense for 2016 = $200,000 x 25% = $50,000

Therefore, the depreciation expense for 2016 is $50,000 (Option B).

Use the Following Information for the Next Questions 104 and 105