Asked by Donald Winters on May 02, 2024
Verified
Beckman Enterprises purchased a depreciable asset on October 1,Year 1 at a cost of $100,000.The asset is expected to have a salvage value of $20,000 at the end of its five-year useful life.If the asset is depreciated on the double-declining-balance method,the asset's book value on December 31,Year 2 will be:
A) $36,000
B) $42,000
C) $54,000
D) $16,000
E) $90,000
Double-Declining-Balance Method
A method of accelerated depreciation that doubles the rate at which an asset's book value depreciates.
Salvage Value
The projected amount an asset is expected to yield when it is sold after its period of usability has ended.
Book Value
The value of an asset according to its balance sheet account balance, which accounts for the cost of the asset minus any depreciation, amortization, or impairment costs.
- Learn about the essential principles of depreciation, covering its calculation processes and impact on accounting statements.
Verified Answer
Depreciation Expense = Beginning Book Value x 2 / Useful Life
For this asset, the depreciation expense for Year 1 would be:
Depreciation Expense = $100,000 x 2 / 5 = $40,000
The book value of the asset at the end of Year 1 would be:
Book Value = $100,000 - $40,000 = $60,000
Using the same formula, the depreciation expense for Year 2 would be:
Depreciation Expense = $60,000 x 2 / 5 = $24,000
The book value of the asset on December 31, Year 2 would be:
Book Value = $60,000 - $24,000 = $36,000
Therefore, the best choice is C.
Learning Objectives
- Learn about the essential principles of depreciation, covering its calculation processes and impact on accounting statements.
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