On 31 December 2016, a new machine with a useful life of 6 years and an estimated residual value of zero was purchased by a business at a cost of $36,000. The amount of depreciation expense charged for the year ended 31 December 2018, using the reducing-balance method at a rate of 30% per annum, is:
A)$6,300.
B)$7,560.
C)$9,820.
D)$1,800.

Question

Quizplus · Accepted Answer

Using reducing-balance method at a rate of 30%, the depreciation expense for the first year is calculated as follows:
Depreciation expense (year 1) = 30% x $36,000 = $10,800

For the second year, we need to calculate the book value of the machine at the beginning of the year.
Book value (beginning of year 2) = $36,000 - $10,800 = $25,200

Depreciation expense (year 2) = 30% x $25,200 = $7,560

Therefore, the amount of depreciation expense charged for 2018 is $7,560 (choice B).

On 31 December 2016, a New Machine with a Useful