Question

GDH Industries purchased a Caterpillar Electric Forklift for $9,000 on January 1, 20X1.

The expected useful life of the forklift is 5 years and the expected residual value is $1,000.

Question: Double-declining balance (DDB) depreciation expense in year two (for the year ending 12/31/X2) for the forklift should be?

Select one:

a. $1,600

b. $2,160

c. $2,320

d. $3,600

e. $1,680

Answer 1

Calculation of depreciation by double declining method
Calculation of Depreciation Rate under DDB:
(100%/Useful life ) x 2 = (100%/5 years) x 2 = 40%
Calculation of depreciation expense for year 2:
Year	Beginning Balance	Depreciation Rate	Depreciation expense (Beginning balance x Depreciation rate)	Closing Balance
1	$9,000	40%	$3,600	$5,400
2	$5,400	40%	$2,160	$3,240
Therefore, the double-declining balance (DDB) depreciation expense in year two (for the year ending 12/31/X2) for the forklift should be $2,160.
Hence, option b is the correct answer.