Dixon Company purchased a depreciable asset for $32,000. The estimated salvage value is $4,000, and the estimated useful life is
1 answer:
Answer:
option (c) $8,000
Explanation:
Data provided in the question;
Purchasing cost of the asset = $32,000
Salvage value = $4,000
Useful life = 4 years
Now,
using the double-declining balance method
Rate of depreciation =
=
= 0.5 or 50% per year
Thus,
Depreciation for the first year = Book value - 0.5 × Book value
= $32,000 - 0.5 × $32,000
= $32,000 - $16,000
= $16,000
Therefore,
The book value for the second year
= Purchasing cost - Depreciation for the first year
= $32,000 - $16,000
= $16,000
Thus,
Depreciation expense for the second year
= Book value for second year - 0.5 × Book value for second
= $16,000 - 0.5 × $16,000
= $16,000 - $8,000
= $8,000
Hence,
The correct answer is option (c) $8,000
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