Question

A plant asset cost $192,000 and is estimated to have a $24,000 salvage value at the end of its 8-year useful life. The annual depreciation expense recorded for the second year using the double-declining-balance method would be

a. $18,375.
b. $27,000
c. $23,625
d. $16,080.
e. $36,000

Answer 1

The second-year depreciation expense using the double-declining-balance method for the given plant asset is $36,000. The calculation involves a depreciation rate of 25% and adjusting the book value from the first year's depreciation before applying the rate again for the second year.

Step-by-step explanation:

The question is asking for the calculation of the second-year depreciation expense of a plant asset using the double-declining-balance method of depreciation. The cost of the asset is $192,000, the salvage value is $24,000 and the useful life is 8 years. To calculate the depreciation expense for the second year, we need to follow these steps:

1. Calculate the depreciation rate. Since the method is double-declining-balance, the rate will be (1 / Useful life) × 2. Therefore, (1 / 8) × 2 = 0.25 or 25%.
2. Determine the book value at the beginning of the second year. For the first year, the depreciation expense would be 25% × $192,000 = $48,000. Hence, the book value at the end of the first year becomes $192,000 - $48,000 = $144,000.
3. Calculate the second-year depreciation expense: 25% × $144,000 = $36,000. However, this should not reduce the book value below the salvage value. If it does, the depreciation expense should be adjusted so that the book value does not fall below $24,000.

Therefore, the correct answer is e. $36,000, since it does not bring the book value below the salvage value.

Answer 2

$36,000

Step-by-step explanation:

Depreciation rate = (1 ÷ number of years) × 2

(1 / 8) × 2 = 0.25

Depreciation expense = Net book value × depreciation rate

Deprecation rate in the first year = $192,000 × 0.25 = $48,000

Net book value for year 2 = $192,000 - $48,000 = $144,000

Depreciation expense for year two = 0.25 × $144,000 = $36,000

I hope my answer helps you