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

DBQ Company purchased a machine on January 1, Year 1 for $60,000. The company estimated a five year useful life and $8,000 residual value. If the company uses the double-declining-balance method for depreciation, what will be the amount of accumulated depreciation on December 31, Year 2?

$33,280

$38,400

$41,600

$48,000

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Verified step by step guidance

Identify the initial cost of the machine, which is $60,000, and note the residual value of $8,000 and the useful life of 5 years.

Calculate the straight-line depreciation rate: 100% divided by the useful life of 5 years, which equals 20%.

Double the straight-line rate to get the double-declining-balance rate: 20% * 2 = 40%.

For Year 1, apply the double-declining-balance rate to the book value at the beginning of the year: $60,000 * 40% = $24,000. This is the depreciation expense for Year 1.

For Year 2, subtract the Year 1 depreciation from the initial cost to get the new book value: $60,000 - $24,000 = $36,000. Then apply the 40% rate to this new book value: $36,000 * 40% = $14,400. Add this to the Year 1 depreciation to find the accumulated depreciation by the end of Year 2.