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A company purchased a POS cash register on January 1 for $5,400

Accounting Mar 25, 2021

A company purchased a POS cash register on January 1 for $5,400. This register has a useful life of 10 years and a salvage value of $400. What would be the depreciation expense for the second-year of its useful life using the double-declining-balance method?

a. $500

b. $800

c. $864

d. $1,000

e. $1,080

Expert Solution

Answer:

c .

Step-by-Step explanation

Total Dep. Exp. = (Cost - Salvage value)/ Estimated life

= ($5,400 - $400) / 10

= $500

Dep. Rate = Total Dep. Exp. / (Cost - Salvage value)

= $500 / $5,000

= 10%

Dep. Rate under double declining = 2 * 10%

= 20%

Dep Exp. For 1^st Year = Cost * Rate

= $5,400 * 20%

= $1,080

Dep. Exp. for 2^ND Year = (Cost - Dep. exp. in 1^st Year) * 20%

= ($5,400 - $1,080) * 20%

= $864

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