Question

A machine with a cost of $57,600 has an estimated residual value of $4,041 and an estimated life of 5 years or 18,205 hours. What is the amount of depreciation for the second full year, using the double-declining-balance method?

a.$11,520

b.$13,824

c.$23,040

d.$21,424

Answer 1

Double-decline Depreciation rate = 2×100% / 5 years = 40%

Cost of machine = $57,600

Depreciation expense for first year = Cost of machine × Double-decline Depreciation rate

= $57,600 × 40%

= $23,040

Depreciation expense for second year = (Cost of machine - Depreciation exp. of 1st year) × Double-decline Depreciation rate

= ($57,600 - $23,040) × 40%

= $13,824

Hence, the amount of dep. for the 2nd full year under double-declining-balance method is $13,824.

Correct answer is option b. $13,824