Depreciation for 2017,using double-declining balance,would be:
A)$32,000.
B)$34,000.
C)$38,000.
D)$40,000.

Question

Quizplus · Accepted Answer

To calculate depreciation using the double-declining balance method, you start with the straight-line depreciation rate (which is calculated by taking the asset's cost minus salvage value divided by the number of years of useful life), and then double it.

For this asset, the straight-line depreciation rate would be (240,000 - 40,000) / 6 = 33,333.33 per year.

Doubling that gives us a depreciation rate of 66,666.67 per year.

In the first year, we apply that rate to the full value of the asset: 
66,666.67 x 240,000 = 15,999,999.68 
The asset can only depreciate to its salvage value of 40,000, so we stop there and record depreciation of 200,000 for the first year.

In the second year, we apply the same rate to the remaining book value (which is the original cost minus accumulated depreciation): 
66,666.67 x (240,000 - 200,000) = 2,666,666.80 
Again, we can only depreciate to the salvage value, so we record depreciation of 40,000 for the second year.

In the third year, the same rate is applied to the remaining book value: 
66,666.67 x (240,000 - 240,000) = 0 
So in the third year, we record zero depreciation.

Adding up the depreciation for the first two years gives us a total of 240,000, so the answer is option C, $38,000.

Depreciation for 2017,using Double-Declining Balance,would Be