Double-declining balance depreciation method?

Demerchant Company was started on January 1, 2003 when it issued common stock for $10,000 cash. Also on January 1, 2003 the company purchased office equipment that cost $6,000 cash. The equipment was delivered under terms FOB Shipping Point and transportation cost was $300. The equipment had a five year useful life and an $800 expected salvage value.





If Demerchant Company had used the double-declining balance depreciation method, the depreciation expense appearing on the 2005 income statement would be:











a. $2,520.





b. $864.65





c. $1,440.





d. $907.20

Double-declining balance depreciation method?
Cost of equipment is $6,300. 5-yr useful life - simple rate is 20%, DDB rate is 40%





Cost, at 1.1.03 $6,300


'03 Depn ($2,520) (40% x $6,300)


Nbv at 12.31.03 $3,780


'04 Depn ($1,512) (40% x $3,780)


Nbv at 12.31.04 $2,268


'05 Depn ($907.20) (40% x $2,268)





Answer is D