Marlow Company purchased a point of sale system on January 1 for $5,800. This system has a useful life of 5 years and a salvage value of $600. What would be the depreciation expense for the second year of its useful life using the double declining balance method?<\/p>\n\n\n\n
The correct answer and explanation is:<\/mark><\/strong><\/p>\n\n\n\n The correct answer is $1,392<\/strong>.<\/p>\n\n\n\n Marlow Company is using the double declining balance (DDB) method<\/strong> to calculate depreciation. This method applies twice the straight-line depreciation rate to the book value of the asset at the beginning of each year.<\/p>\n\n\n\n The formula for the straight-line depreciation rate is: Rate=100%Useful Life=100%5=20%\\text{Rate} = \\frac{100\\%}{\\text{Useful Life}} = \\frac{100\\%}{5} = 20\\%<\/p>\n\n\n\n Since we are using the double<\/strong> declining balance method, we multiply the straight-line rate by 2: DDB Rate=20%\u00d72=40%\\text{DDB Rate} = 20\\% \\times 2 = 40\\%<\/p>\n\n\n\n The first-year depreciation is calculated as: Depreciation=Beginning Book Value\u00d7DDB Rate\\text{Depreciation} = \\text{Beginning Book Value} \\times \\text{DDB Rate} =5,800\u00d740%=2,320= 5,800 \\times 40\\% = 2,320<\/p>\n\n\n\n The book value at the end of the first year: 5,800\u22122,320=3,4805,800 – 2,320 = 3,480<\/p>\n\n\n\n For the second year, the beginning book value is $3,480<\/strong>: Depreciation=3,480\u00d740%=1,392\\text{Depreciation} = 3,480 \\times 40\\% = 1,392<\/p>\n\n\n\n Thus, the depreciation expense for the second year is $1,392<\/strong>.<\/p>\n\n\n\n The DDB method is useful when an asset loses more value in the earlier years. It allows companies to recognize higher expenses earlier, reducing taxable income and reflecting actual asset usage.<\/p>\n","protected":false},"excerpt":{"rendered":" Marlow Company purchased a point of sale system on January 1 for $5,800. This system has a useful life of 5 years and a salvage value of $600. What would be the depreciation expense for the second year of its useful life using the double declining balance method? The correct answer and explanation is: 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-203890","post","type-post","status-publish","format-standard","hentry","category-exams-certification"],"_links":{"self":[{"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/posts\/203890","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=203890"}],"version-history":[{"count":0,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/posts\/203890\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/media?parent=203890"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/categories?post=203890"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/tags?post=203890"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}Explanation:<\/h3>\n\n\n\n
Step 1: Calculate the Straight-Line Depreciation Rate<\/strong><\/h4>\n\n\n\n
Step 2: Calculate First-Year Depreciation<\/strong><\/h4>\n\n\n\n
Step 3: Calculate Second-Year Depreciation<\/strong><\/h4>\n\n\n\n
\n\n\n\nWhy Use the Double Declining Balance Method?<\/strong><\/h3>\n\n\n\n