CFA Practice Question

There are 520 practice questions for this study session.

CFA Practice Question

Taylor Corporation purchased a new asset for $80,000. The asset had an estimated life of 5 years and an estimated salvage value of $20,000. What is the depreciation expense in the second year if the company uses the double-declining-balance method?
A. $16,000
B. $19,200
C. $14,400
Explanation: The double-declining-balance rate is 40% [(100%/5) x 2]. The beginning book value of $80,000 is multiplied by the 40% rate to get a $32,000 depreciation expense for the first year. The second year will be .4 x ($80,000 - $32,000) = $19,200. The accelerated method will cause more depreciation in the early years and a lower value for the assets.

User Contributed Comments 8

User Comment
linjinfeng What is double-declining balance method? 100/5*2=40, book value 80,000 first year depreciation expense is 32,000 second year value is 80,000-32,000 the second year depreciation is .4*48,000
Cata remember: DDB does not take salvage!!!
todolist ignore salvage value in DDB
twintigers 2*1/(DP years)*BV of the year
StJohnDale =(2/life of asset) * NBV
dash1s 20 second problem if you use the BAII plus depreciation worksheet.
praj24 IGNORE SALVAGE!!!
janis36 BEWARE SALVAGE!
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