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 depreciation expense for the first year of its useful life using the double-declining-balance method?A) $2,320

B) $300
C) $2,720
D) $680
E) $600

Answer 1

The correct answer is option (D).

Step-by-step explanation:

According to the scenario, the given data are as follows:

Purchase value = $3,400

Useful Life = 10 years

So, we can calculate the depreciation expense for the first year of its useful life by using following formula:

Depreciation Per Year ( Double-declining-balance method) = 2 × Depreciation Rate (Straight Line Method) × Purchase Value

Where, Depreciation Rate (Straight Line Method) = 100% / Useful Life

= 10%

So, by putting the following value in the formula:

= 2 × 10% × $3,400

= $680

Hence, the depreciation expense for the first year of its useful life is $680.