Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

8. Long Lived Assets

Depreciation: Declining Balance

Financial Accounting

8. Long Lived Assets

Depreciation: Declining Balance

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Multiple Choice

ABC Company purchased a new machine on January 1, Year 1 for $44,000. The company expects the machine to last ten years. The company thinks it could sell the scrap metal from the machine for $4,000 at the end of its useful life. If the company uses the double-declining method for depreciation, what will be the net book value of the machine on December 31, Year 2?

$25,600

$26,400

$28,000

$28,160

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Verified step by step guidance

Determine the initial cost of the machine, which is $44,000.

Calculate the salvage value, which is $4,000, and note that it will not affect the double-declining balance method directly.

Determine the useful life of the machine, which is 10 years.

Calculate the double-declining rate: (2 / Useful life) = (2 / 10) = 20%.

For Year 1, calculate depreciation: 20% of $44,000 = $8,800. Subtract this from the initial cost to get the book value at the end of Year 1: $44,000 - $8,800 = $35,200. For Year 2, calculate depreciation: 20% of $35,200 = $7,040. Subtract this from the Year 1 book value to get the book value at the end of Year 2: $35,200 - $7,040.