Compatibility Services acquired a $100,000 machine on January 1,20X3.The machine is estimated to have a useful life of 8 years,and a residual value of $10,000.Assume Compatibility Services was considering the use of double-declining-balance depreciation.What is the depreciation expense in 20X3 and 20X4?
$\begin{array}{ll}
&20 \times 3&20 \times 4\
A)&\$ 12,500 & \$ 12,500 \
B)&\$ 20,000 & \$ 20,000 \
C)&\$ 22,500 & \$ 16,875 \
D)&\$ 25,000 & \$ 18,750 \
E)&\$ 25,000 & \$ 15,000
\end{array}$

Question

Compatibility Services acquired a $100,000 machine on January 1,20X3.The machine is estimated to have a useful life of 8 years,and a residual value of $10,000.Assume Compatibility Services was considering the use of double-declining-balance depreciation.What is the depreciation expense in 20X3 and 20X4? 
$\begin{array}{ll}
&20 \times 3&20 \times 4\
A)&\$ 12,500 & \$ 12,500 \
B)&\$ 20,000 & \$ 20,000 \
C)&\$ 22,500 & \$ 16,875 \
D)&\$ 25,000 & \$ 18,750 \
E)&\$ 25,000 & \$ 15,000
\end{array}$

Quizplus · Accepted Answer

The double-declining-balance depreciation rate is 2 divided by the useful life, which is 2/8 = 25% per year. For 20X3, the depreciation expense is 25% of $100,000, which is $25,000. For 20X4, the book value at the beginning of the year is $100,000 - $25,000 = $75,000, so the depreciation expense is 25% of $75,000, which is $18,750.

Compatibility Services Acquired a $100,000 Machine on January 1,20X3