On January 1, a machine with a useful life of five years and a residual value of $3,000 is purchased for $15,000. What is the depreciation expense in year 2 using the double-declining-balance method?
A) $3,600
B) $4,800
C) $4,080
D) $6,000

Question

Quizplus · Accepted Answer

The double-declining-balance method calculates depreciation expense as 2 * (straight-line depreciation rate) * book value. The straight-line depreciation rate is (cost - residual value) / useful life. In this case, the cost is $15,000, the residual value is $3,000, and the useful life is 5 years. So, the straight-line depreciation rate is (15,000 - 3,000) / 5 = $2,400. The book value at the beginning of year 2 is $15,000 - $2,400 = $12,600. So, the depreciation expense in year 2 is 2 * $2,400 * $12,600 = $6,000.

On January 1, a Machine with a Useful Life of Five