Final answer:
To find the second year depreciation expense of an office building using the double-declining balance method, calculate 8% of the building's book value at the end of the first year. The depreciation expense for the second year would be $334,400.
Step-by-step explanation:
To calculate the depreciation expense for the second year using the double-declining balance method, first determine the depreciation rate. Since the building's useful life is 25 years, the straight-line depreciation rate is 1/25, or 4%. The double-declining balance rate is twice that amount, so 8%. Begin by subtracting the salvage value from the cost of the building, which gives us the depreciable base of the asset. The building's cost is $4,500,000, and the salvage value is $500,000, resulting in a depreciable base of $4,000,000.
In the first year, the depreciation expense would be 8% of $4,000,000, which equals $320,000. The book value of the building at the end of the first year will therefore be $4,500,000 - $320,000 = $4,180,000. To calculate the depreciation for the second year, apply the 8% rate to the new book value.
The depreciation expense for the second year would be 8% of $4,180,000, which is $334,400. This is the amount of depreciation expense for the second year using the double-declining balance method.