US CMA Part 1 · Chapter 1 · Question 10 of 23
Equipment costing $90,000 with an estimated salvage value of $10,000 and a five-year useful life is depreciated using the double-declining-balance method. What is depreciation expense in Year 2?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: C) $21,600
Explanation
The DDB rate is 2 / 5 = 40%, applied to opening book value without deducting salvage. Year 1 = $90,000 x 40% = $36,000. Year 2 = ($90,000 - $36,000) x 40% = $21,600. Salvage value only limits depreciation so that book value does not fall below $10,000.
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