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Schager Company purchased a computer system at a cost of $60,000 on 1/1/2019. The estimated useful life is 8 years, and the estimated residual value is $5,000. Assuming the company will use the double-declining-balance method, what is the depreciation expense for the second year (2020)

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Answer:

$11,250

Explanation:

The computation of depreciation expense for the second year is given below:-

Double declining rate = 1 ÷ 8 × 2

= 25%

Here, for computing the depreciation for 2nd year we need to first calculate the 1st year of depreciation.

Depreciation for the 1st year = Purchase cost × Double declining rate

= $60,000 × 25%

= $15,000

Depreciation for the 2nd year = (Purchase cost - Depreciation for the 1st year) × Double declining rate

= ($60,000 - $15,000) × 25%

= $45,000 × 25%

= $11,250

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