Question

On January 1, 2019, Seek Company purchased a copy machine. The machine costs $960,000, its estimated useful life is 8 years, and its expected salvage value is $60,000.

What is the depreciation expense for 2020 using double-declining-balance method?

Select one:

A. $157,500

B. $ 105,000

C. $180,000

D. $240,000

Answer 1

• Working

A	Cost	$          960,000.00
B	Residual Value	$           60,000.00
C=A - B	Depreciable base	$          900,000.00
D	Life [in years]	8
E=C/D	Annual SLM depreciation	$          112,500.00
F=E/C	SLM Rate	12.50%
G=F x 2	DDB Rate	25.00%

Year	Beginning Book Value	Depreciation rate	Depreciation expense	Ending Book Value	Accumulated Depreciation
2019	$           960,000.00	25.00%	$       240,000.00	$           720,000.00	$      240,000.00
2020	$           720,000.00	25.00%	$       180,000.00	$           540,000.00	$      420,000.00

• Correct Answer = Option ‘C’ $ 180,000