Marlow Company purchased a point of sale system on January 1 for $6,800. This system has a useful life of 4 years and a salvage value of $1,100. What would be the depreciation expense for the second year of its useful life using the double-declining-balance method

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Explanation:

Given that;

POS system = $6,800

Useful life = 4 years

Salvage value = $1,100

• Double declining method means that the value of depreciation is more in the early years, compared to the later years of the asset.

Straight line depreciation = (6,800 - 1,100) / 4yrs

= $1,425

Then,

1,425/5,700 = 0.25 or 25%

25% × 2 = 50% [ Double declining rate]

Depreciation rate under double declining method

Year 1 = 6,800 × 50% = 3,400 depreciation expense

Year 1 book value = 6,800 - 3,400

= 3,400

Year 2 = 3,400 × 50% = 1,700 depreciation expense

Year 2 book value = 3,400 - 1,700

= 1,700

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Explanation: