Question

Jasmine Company purchased a depreciable asset for $225,000. The estimated salvage value is $15,000, and the estimated useful life is 8 years. The double-declining balance method will be used for depreciation. What is the depreciation expense for the second year on this asset?

Answer 1

The depreciation expense for the second year on this asset using the double-declining balance method is $42,187.50.

Step-by-step explanation:

To calculate the depreciation expense for the second year using the double-declining balance method, we first need to calculate the annual depreciation rate. The formula for the annual depreciation rate is:

annual depreciation rate = (2 / estimated useful life) * 100

In this case, the estimated useful life is 8 years, so the annual depreciation rate is (2 / 8) * 100 = 25%.

Next, we calculate the depreciation expense for the second year by multiplying the net book value at the beginning of the year by the annual depreciation rate:

depreciation expense = net book value at beginning of year * annual depreciation rate

The net book value at the beginning of the second year is the cost of the asset minus the accumulated depreciation for the first year, which is equal to $225,000 - ($225,000 * (1 - annual depreciation rate)) = $225,000 - ($225,000 * (1 - 0.25)) = $168,750.

So, the depreciation expense for the second year is $168,750 * 25% = $42,187.50.