Question

Schager Company purchased a computer system at a cost of $40,000. The estimated useful life is 10 years, and the estimated residual value is $5,000. Assuming the company will use the double-declining-balance method, what is the depreciation expense for the second year

Answer 1

$6400

Step-by-step explanation:

The double-declining method uses twice the percentage of the straight-line method.

For Schager Company, the straight-line method rate will be 1/10 x 100 = 10%

The double-declining rate will be 20%

The first-year depreciation will be 20% x $40,000

=0.2 x $40,000

= $8,000

The second-year depreciation will be, 20% x (40,000- 8,000)

=20/100 x 32,00

=$6400