Question

A company purchased a computer system at a cost of $25,000. The estimated useful life is 8 years, and the estimated residual value is $6,000. Assuming the company uses the double-declining-balance method, what is the depreciation expense for the second year

Answer 1

Answer:

$4,687.50

Explanation:

The computation of the depreciation expense of the second year using the double-declining method is shown below:

First we have to determine the depreciation rate which is given below:

= One ÷ useful life

= 1 ÷ 4

= 12.5%

Now the rate is double So, 25%

In year 1, the original cost is $25,000, so the depreciation is $6,250 after applying the 25% depreciation rate

And, in year 2, the ($25,000 - $6,250) × 25% = $4,687.50