Question

A plant asset cost $144,000 and is estimated to have an $18,000 salvage value at the end of its 8-year useful life. The annual depreciation expense recorded for the third year using the double-declining-balance method would be_________.

Answer 1

$20,250

Step-by-step explanation:

The computation of the depreciation expense under the double-declining balance method is shown below:

First we have to find the depreciation rate which is shown below:

= One ÷ useful life

= 1 ÷ 48

= 12.5%

Now the rate is double So,25%

In year 1, the original cost is $144,000, so the depreciation is $36,000 after applying the 25% depreciation rate

And, in year 2, the ($144,000 - $36,000) × 25% = $27,000

And, in year 3, the ($144,000 - $36,000 - $27,000) × 25% = $20,250