Final answer:
The amount of annual depreciation recorded for the second year after purchase would be $141,600.
Step-by-step explanation:
The double-declining-balance method of depreciation is an accelerated depreciation method that allows a company to deduct a larger amount of depreciation expense in the early years of an asset's life. To calculate annual depreciation using this method, you first need to determine the asset's straight-line depreciation rate. In this case, the useful life of the equipment is 5 years, so the straight-line rate is 1/5 or 20%. The double-declining-balance method doubles this rate, resulting in a depreciation rate of 40%.
To find the amount of annual depreciation recorded for the second year after purchase, you apply the depreciation rate to the net book value of the equipment at the beginning of the year. The net book value is the original cost minus accumulated depreciation. In this case:
Original cost of the equipment = $590,000
Accumulated depreciation at the beginning of year 2 = (1st year depreciation) + (2nd year depreciation) = (0.4 * $590,000) + (0.4 * $590,000 * 0.4) = $236,000
Net book value at the beginning of year 2 = $590,000 - $236,000 = $354,000
Annual depreciation for year 2 = Depreciation rate * Net book value = 0.4 * $354,000 = $141,600