Question

Marlow Company purchased a point of sale system on January 1 for $5,600. This system has a useful life of 4 years and a salvage value of $500. What would be the depreciation expense for the second year of its useful life using the double-declining-balance method?a. $1,275.b. $1,336.c. $2,550.d. $2,800.e. $1,400.

Answer 1

Answer:

Annual depreciation= $1,275

Explanation:

Giving the following information:

Purchase price= $5,600

Useful life= 4 years

Salvage value= $500

To calculate the annual depreciation, we need to use the following formula each year:

Annual depreciation= 2*[(book value)/estimated life (years)]

Year 1:

Annual depreciation= 2*[(5,600 - 500) / 4]

Annual depreciation= $2,550

Year 2:

Annual depreciation= 2*[(5,100 - 2,550) / 4]

Annual depreciation= $1,275