Question

Marigold Corp. purchased a depreciable asset for $710000. The estimated salvage value is $40000, and the estimated useful life is 10 years. The double-declining balance method will be used for depreciation. What is the depreciation expense for the second year on this asset? $142000 $106100 $67000 $113600

Answer 1

SOLUTION : 1
	CALCULATION OF THE DEPRECIATION AS PER SUM OF DOUBLE DECLINE METHOD
	Purchase Cost of Machine	$                  7,10,000
	Useful Life =	10 years
	Depreciation per year =	$                      71,000
	(Purchase price / Useful life)
	CALCULATION OF THE RATE OF DEPRECIATION
	Rate of Depreciation =	$ 71,000 / $ 710,000
	(Depreication / Purchase price )
	Rate of Depreciation =	0.10 or 10%
	Double decline deprection rate = 10% * 2 =	20%
	Purchase price =	$                  7,10,000
	Depreciation for the year 1	$                  1,42,000
	Closing balance for the year 1	$                  5,68,000
	Opening Balance for the year 2	$                  5,68,000
	Depreciation for the year 2	$                  1,13,600
	Closing balance for the year 2	$                  4,54,400
	Answer = Option 4 =$ 113,600
SOLUTION : 2
	The term "Depreciable base" refers to = The cost of the assets less related depreciation recorded to date