A company purchased factory equipment for $710000. It is estimated that the equipment will have a $66000 salvage value at the end of its estimated 5-year useful life. If the company uses the double-declining-balance method of depreciation, the amount of annual depreciation recorded for the second year after purchase would be

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A: Double declining depreciation rate = Straight line depreciation rate x 2 = (100/5 years) x 2 = 40%

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A:

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Q: A company purchases

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A: Depreciation is an accounting method of allocating the cost of a tangible asset over its useful life…

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Depreciation Methods

The word "depreciation" is defined as an accounting method wherein the cost of tangible assets is spread over its useful life and it usually denotes how much of the assets value has been used up. The depreciation is usually considered as an operating expense. The main reason behind depreciation includes wear and tear of the assets, obsolescence etc.

Depreciation Accounting

In terms of accounting, with the passage of time the value of a fixed asset (like machinery, plants, furniture etc.) goes down over a specific period of time is known as depreciation. Now, the question comes in your mind, why the value of the fixed asset reduces over time.