A machine with a cost of $65,000 has an estimated residual value of $5,000 and an estimated life of 4 years or 18,000 hours. What is the amount of depreciation for the second year, using the double declining-balance method?

a. $16,250

b. $32,500

c. $15,000

d. $30,000

The correct answer is C.

Explanation:

Giving the following information:

A machine with a cost of $65,000 has an estimated residual value of $5,000 and an estimated life of 4 years or 18,000 hours.

To calculate the depreciation expense for each year, we need to use the following formula:

Annual depreciation = 2*[ (book value) / estimated life (years) ]

Year1 = [ (65,000 - 5,000) / 4]*2 = $30,000

Year2 = [ (60,000 - 30,000) / 4]*2 = $15,000