Final answer:
The second year's depreciation of factory equipment using the double-declining-balance method is $177,600, calculated by taking 40% of the book value at the start of the second year, which is the remainder after subtracting the first year's depreciation from the initial cost. Option D is correct.
Step-by-step explanation:
The question asks for the calculation of the second year's depreciation for a company's factory equipment using the double-declining-balance method. The initial cost of the equipment is $740,000, the salvage value is $79,000, and the useful life is 5 years.
To calculate the double-declining rate, we double the straight-line rate, which is 1 divided by the useful life (20%). Therefore, the double-declining rate is 40%. In the first year, the depreciation would be 40% of the initial cost. The book value at the end of the first year is the initial cost minus the first year's depreciation.
The book value at the start of the second year is used to calculate that year's depreciation:
Calculate the straight-line depreciation rate: 1 / 5 years = 20%
Double the straight-line rate for the double declining balance: 20% * 2 = 40%
Calculate first year depreciation: $740,000 * 40% = $296,000
Determine the book value at the end of first year: $740,000 - $296,000 = $444,000
Calculate the second year depreciation: $444,000 * 40% = $177,600.
Thus, the correct answer for the amount of the second year's depreciation is $177,600, which corresponds to option d.