Question

Cardinal Industries purchased a generator that cost $11,000. It has an estimated life of five years and a residual value of $1,000. It is estimated that it will be good for 5,000 hours. Compute the depreciation expense for the second year using the double-declining-balance method of depreciation.

Answer 1

The answer is $2,640

Explanation:

First, we determine straight line depreciation = 1/ useful life = 1/5 =20%

Second, the double-declining rate = 2 x straight line depreciation = 2 x 20% = 40%.

Third, determine the depreciation expenses for first year = (Cost of asset- accumulated depreciation) x double declining rate = (11,000-0) x 40% = $4,400

Finally, determine the depreciation expenses for second year = (Cost of asset - accumulated depreciation) x double declining rate = (11,000-4,400) x 40% = $4,400 = $2,640