Question

Marlow Company purchased a point of sale system on January 1 for $3,400 This system has a useful life of 10 years and a salvage value of $400 What would be the book value of the asset at the end of the first year of its useful fe using the double-declining balance method? a) $680 b) $2,320 c) $2,720 d) $600 e) $300

Answer 1

c) $2,720

Step-by-step explanation:

For computing the book value of the asset at the end of the first year, First we have to find the depreciation rate which is shown below:

= One ÷ useful life

= 1 ÷ 10

= 10%

Now the rate is double So, 20%

In year 1, the original cost is $3,400, so the depreciation is $680 after applying the 20% depreciation rate

So, the book value would be

= Purchase value of point of sale system - depreciation expense

= $3,400 - $680

= $2,720