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Marlow company purchased a point of sale system on january 1 for $3,400. this system has a useful life of 10 years and a salvage value of $400. what would be the depreciation expense for the first year of its useful life using the double-declining-balance method?

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Given:
POS system = 3,400
useful life = 10 years
salvage value = 400

double declining method means that the depreciation expense is higher in the early years than the later years of the asset.

Straight line depreciation = (3,400 - 400) / 10 yrs = 300 
300 / 3000 = 0.10 or 10%
10% x 2 = 20% double declining rate

Depreciation expense under the double declining method:

Year 1: 3,400 x 20% =  680 depreciation expense.
Year 1 book value = 3,400 - 680 = 2,720

Year 2 : 2,720 x 20% = 544 depreciation expense
Year 2 book value = 2,720 - 544 = 2,176

The double-declining balance method is known as the 200% declining balance method. This type of method accelerates depreciation and depreciates assets at a much faster rate than the straight-line method. The straight-line method depreciates expenses fast at the beginning and then slows down whereas the double-declining balance method keeps up at a higher speed the entire time.

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