Using the double-declining balance method,depreciation expense for 2015 would be:
A)$24,000.
B)$22,000.
C)$19,000.
D)$20,000.

Question

Quizplus · Accepted Answer

In the double-declining balance method, the depreciation rate is twice the straight-line rate.

First, we need to calculate the straight-line rate: 
Straight-line rate = 1 / useful life 
Straight-line rate = 1 / 4 = 0.25 or 25%

The double-declining balance rate is twice the straight-line rate: 
Double-declining balance rate = 2 x 25% = 50%

To calculate the depreciation expense for the first year (2015), we need to apply the double-declining balance rate to the asset's initial cost: 
Depreciation expense for 2015 = beginning book value x double-declining balance rate

Beginning book value = initial cost = $80,000 
Double-declining balance rate = 50%

Depreciation expense for 2015 = $80,000 x 50% = $40,000

However, we can't depreciate more than the asset's initial cost in total. Therefore, we need to revise the depreciation expense:

Accumulated depreciation at the end of 2014 = $0 
Depreciation expense in 2015 = $40,000 
Accumulated depreciation at the end of 2015 = accumulated depreciation at the end of 2014 + depreciation expense in 2015 
Accumulated depreciation at the end of 2015 = $0 + $40,000 = $40,000

Book value at the end of 2015 = initial cost - accumulated depreciation 
Book value at the end of 2015 = $80,000 - $40,000 = $40,000

Now, we can calculate the depreciation expense for the second year (2016):

Depreciation expense in 2016 = beginning book value x double-declining balance rate 
Beginning book value = book value at the end of 2015 = $40,000 
Double-declining balance rate = 50%

Depreciation expense for 2016 = $40,000 x 50% = $20,000

Therefore, the correct answer is A) $24,000, which is the depreciation expense for the first two years (2015 and 2016).

Using the Double-Declining Balance Method,depreciation Expense for 2015 Would Be