Question

salt company plans to depreciate a new building using the double declining-balance depreciation method. the building cost is $1,630,000. the estimated residual value of the building is $130,000 and it has an expected useful life of 20 years. assuming the first year's depreciation expense was recorded properly, what would be the amount of depreciation expense for the second year?

Answer 1

The amount of depreciation expense for the second year can be calculated using the double declining-balance depreciation method.

Step-by-step explanation:

The amount of depreciation expense for the second year can be calculated using the double declining-balance depreciation method. This method involves deducting a fixed percentage from the book value of the asset each year. In this case, the fixed percentage is twice the straight-line depreciation rate.

First, calculate the straight-line depreciation rate by dividing the depreciable cost (cost - residual value) by the useful life. In this case, the depreciable cost is $1,630,000 - $130,000 = $1,500,000, and the useful life is 20 years, so the straight-line rate is $1,500,000 / 20 = $75,000 per year.

Next, calculate the double declining-balance rate by multiplying the straight-line rate by 2. In this case, the double declining-balance rate is $75,000 x 2 = $150,000 per year.

Finally, calculate the depreciation expense for the second year by multiplying the beginning book value (building cost) by the double declining-balance rate. In this case, the building cost is $1,630,000, so the depreciation expense for the second year would be $1,630,000 x $150,000 / $1,500,000 = $163,000.