Answer:
option (b) $13,500
Explanation:
Data provided in the question:
Cost of the plant asset = $96,0003
Salvage value = $12,000
Useful life = 8 years
Now,
using the double-declining-balance method
Depreciation rate = [tex]2\times\frac{\textup{1}}{\textup{Useful life}}[/tex]
or
Depreciation rate = [tex]2\times\frac{\textup{1}}{\textup{8}}[/tex]
or
Depreciation rate = 0.25 or 25%
Thus,
For year 1
Depreciation expense = Depreciation rate × year book value
= 0.25 × $96,000
= $24,000
Book value for year 2 = $96,000 - $24,000 = $72,000
For year 2
Depreciation expense = Depreciation rate × year 2 book value
= 0.25 × $72,000
= $18,000
Book value for year 3 = $72,000 - $18,000 = $54,000
For year 3
Depreciation expense = Depreciation rate × year 3 book value
= 0.25 × $54,000
= $13,500
Hence,
The correct answer is option (b) $13,500
