Question

A company purchased a computer system at a cost of $32,000. The estimated useful life is 5 years, and the estimated residual value is $5,000. Assuming the company uses the double-declining-balance method, what is the depreciation expense for the second year?

Answer 1

Double Decling Method:The Method at which the Depreciation is calculated twice that of calculated as per straight line method (SLM) and restricted upto Salvage Value

Indicator	Particulars	Amount
A	Cost of the Computer	$        32,000
B	Salvage Value	$          5,000
C	Use ful Life (In Years)	$                  5
D	Depreciation as per SLM basis[(A-B)/C]	$          5,400
E	Depreciation as per Double Declining Method (2*D) ( First Year)	$        10,800
F	Depreciation as per Double Declining Method (2*D) ( Second Year)	$        10,800