{"id":193964,"date":"2025-02-22T06:13:58","date_gmt":"2025-02-22T06:13:58","guid":{"rendered":"https:\/\/learnexams.com\/blog\/?p=193964"},"modified":"2025-02-22T06:14:00","modified_gmt":"2025-02-22T06:14:00","slug":"marlow-company-purchased-a-point-of-sale-system-on-january-1-for-3400","status":"publish","type":"post","link":"https:\/\/www.learnexams.com\/blog\/2025\/02\/22\/marlow-company-purchased-a-point-of-sale-system-on-january-1-for-3400\/","title":{"rendered":"Marlow Company purchased a point of sale system on January 1 for $3,400"},"content":{"rendered":"\n

Marlow Company purchased a point of sale system on January 1 for $3,400. This system has a useful life of 10 years and a salvage value of $400. What would be the accumulated depreciation at the end of the second year of its useful life using the double-declining-balance method?<\/p>\n\n\n\n

A.$2,176.<\/p>\n\n\n\n

B.$544.<\/p>\n\n\n\n

C.$1,200.<\/p>\n\n\n\n

D.$600.<\/p>\n\n\n\n

E.$1,224.<\/p>\n\n\n\n

The Correct Answer and Explanation is :<\/strong><\/mark><\/p>\n\n\n\n

Correct Answer: E. $1,224<\/strong><\/h3>\n\n\n\n

Explanation:<\/strong><\/h3>\n\n\n\n

The Double-Declining Balance (DDB)<\/strong> method is an accelerated depreciation method<\/strong> that applies twice the straight-line depreciation rate<\/strong> to the book value of the asset at the beginning of each year.<\/p>\n\n\n\n

Step 1: Calculate the Straight-Line Depreciation Rate<\/strong><\/h4>\n\n\n\n

[
\\text{Straight-line Rate} = \\frac{1}{\\text{Useful Life}} = \\frac{1}{10} = 10\\%
]
The double-declining rate is:
[
10\\% \\times 2 = 20\\%
]<\/p>\n\n\n\n

Step 2: Calculate Depreciation for Year 1<\/strong><\/h4>\n\n\n\n

The initial book value<\/strong> of the asset is $3,400<\/strong>.<\/p>\n\n\n\n

[
\\text{Depreciation for Year 1} = 3,400 \\times 20\\% = 680
]<\/p>\n\n\n\n

The new book value after Year 1 is:<\/p>\n\n\n\n

[
3,400 – 680 = 2,720
]<\/p>\n\n\n\n

Step 3: Calculate Depreciation for Year 2<\/strong><\/h4>\n\n\n\n

Now, applying 20% to the new book value ($2,720$):<\/strong><\/p>\n\n\n\n

[
\\text{Depreciation for Year 2} = 2,720 \\times 20\\% = 544
]<\/p>\n\n\n\n

Step 4: Determine Accumulated Depreciation at the End of Year 2<\/strong><\/h4>\n\n\n\n

[
\\text{Total Accumulated Depreciation} = 680 + 544 = 1,224
]<\/p>\n\n\n\n

Thus, at the end of the second year<\/strong>, the accumulated depreciation<\/strong> is $1,224$<\/strong>, which matches option E<\/strong>.<\/p>\n\n\n\n

\n\n\n\n

Why Use the Double-Declining Balance Method?<\/strong><\/h3>\n\n\n\n
    \n
  1. Faster Depreciation<\/strong> \u2013 It expenses more in the early years, which is useful for assets that lose value quickly.<\/li>\n\n\n\n
  2. Better Matching of Expenses<\/strong> \u2013 Businesses often use DDB for assets like technology that become obsolete faster.<\/li>\n\n\n\n
  3. Tax Benefits<\/strong> \u2013 Higher initial depreciation reduces taxable income in early years.<\/li>\n<\/ol>\n\n\n\n

    Using the DDB method<\/strong>, Marlow Company recognizes $1,224<\/strong> in accumulated depreciation by the end of year 2<\/strong>.<\/p>\n\n\n\n

    \n\n\n\n

    Now, I will generate an image to illustrate the depreciation calculation visually.<\/p>\n\n\n\n

    Here is the visual representation of the Double-Declining Balance (DDB) depreciation method, illustrating the depreciation calculations for the first two years. Let me know if you need any modifications or further explanations!<\/p>\n\n\n\n

    \"\"<\/figure>\n","protected":false},"excerpt":{"rendered":"

    Marlow Company purchased a point of sale system on January 1 for $3,400. This system has a useful life of 10 years and a salvage value of $400. What would be the accumulated depreciation at the end of the second year of its useful life using the double-declining-balance method? A.$2,176. B.$544. C.$1,200. D.$600. E.$1,224. The […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"site-sidebar-layout":"default","site-content-layout":"","ast-site-content-layout":"default","site-content-style":"default","site-sidebar-style":"default","ast-global-header-display":"","ast-banner-title-visibility":"","ast-main-header-display":"","ast-hfb-above-header-display":"","ast-hfb-below-header-display":"","ast-hfb-mobile-header-display":"","site-post-title":"","ast-breadcrumbs-content":"","ast-featured-img":"","footer-sml-layout":"","ast-disable-related-posts":"","theme-transparent-header-meta":"","adv-header-id-meta":"","stick-header-meta":"","header-above-stick-meta":"","header-main-stick-meta":"","header-below-stick-meta":"","astra-migrate-meta-layouts":"default","ast-page-background-enabled":"default","ast-page-background-meta":{"desktop":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"tablet":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"mobile":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""}},"ast-content-background-meta":{"desktop":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"tablet":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"mobile":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""}},"footnotes":""},"categories":[25],"tags":[],"class_list":["post-193964","post","type-post","status-publish","format-standard","hentry","category-exams-certification"],"_links":{"self":[{"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/posts\/193964","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/comments?post=193964"}],"version-history":[{"count":0,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/posts\/193964\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/media?parent=193964"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/categories?post=193964"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/tags?post=193964"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}