On January 1,2007, Sneed Corporation purchased machinery costing $ 8 million with a salvage value of $1 million. For the year ended 2007, Sneed recognized depreciation expense of $ 3.2 million from the machinery using the double-declining-balance method. Should the depreciation expense be reported as an operating component in the income statement, and what is the estimated useful life of the machinery Operating expense Useful life ()①A. No 5 years ②B. Yes 4 years ③C. Yes 5 years
A. ①
B. ②
C. ③
参考答案：C
解析：
Depreciation expense is reported as an operating component in the income statement. Given the first year depreciation expense of $ 3.2 million, and the original cost of $ 8 million, the declining balance percentage is 40% ($ 3.2 million depreciation expense/$ 8 million cost). The double declining balance percentage is equal to 2/useful life = 40%. Thus, the useful life is 5 years (2/0.40).