Question

Mohr Company purchases a machine at the beginning of the year at a cost of $26,000. The machine is depreciated using the double-declining-balance method. The machine’s useful life is estimated to be 5 years with a $5,000 salvage value. Depreciation expense in year 2 is:

Multiple Choice

$15,600.

$10,400.

$8,400.

$6,240.

$5,200.

Answer 1

Answer

• Correct Answer = Option #4: $ 6,240 = Depreciation expense for Year 2
• Working

A	Cost	$            26,000.00
B	Residual Value	$              5,000.00
C=A - B	Depreciable base	$            21,000.00
D	Life [in years]	5
E=C/D	Annual SLM depreciation	$              4,200.00
F=E/C	SLM Rate	20.00%
G=F x 2	DDB Rate	40.00%

Year	Beginning Book Value	Depreciation rate	Depreciation expense	Ending Book Value
1	$              26,000.00	40.00%	$         10,400.00	$             15,600.00
2	$              15,600.00	40.00%	$            6,240.00 = Answer	$                9,360.00