Question

Chapter 10 Review Problems

The cost of an asset is $1,200,000, and its residual value is $100,000. Estimated useful life of the asset
is eight years. Calculate depreciation for the second year using the double-declining-balance
method of depreciation. (Do not round any intermediate calculations, and round your final answer
to the nearest dollar.)

Answer 1

$225,000

Step-by-step explanation:

First, we need to calculate the annual depreciation rate:

Annual depreciation rate = 2 / Useful life

Annual depreciation rate = 2 / 8

Annual depreciation rate = 0.25 or 25%

Next, we calculate the first year's depreciation using the double-declining-balance method:

First-year depreciation = (Cost of asset - Accumulated depreciation) x Annual depreciation rate

First-year depreciation = ($1,200,000 - $0) x 25%

First-year depreciation = $300,000

Now, we can calculate the second year's depreciation:

Second-year depreciation = (Cost of asset - Accumulated depreciation) x Annual depreciation rate

Second-year depreciation = ($1,200,000 - $300,000) x 25%

Second-year depreciation = $225,000

Therefore, the depreciation for the second year using the double-declining-balance method is $225,000.