Math
posted by Kara on .
An asset is purchased for $50,000. It has an estimated useful life of eight years and salvage value of $6,000.if the asset is depreciated using the doubledeclining balance method,what are the depreciation expense and book value at the end of year two?

The depreciation method to be used is explained here:
http://beginnersinvest.about.com/cs/investinglessons/l/bldbldeclinebal.htm
Using straightline depreciation, the depreciation percentage each year would be 1/8 or 12.5%. With the doubledecliningbalance method (ddbm), it is 25% per year until the annual depreciation allowance is less than it would be with the straightline method. The firstyear depreciation allowance withthe d.d.b.m. is $11,000, and the book value at the end of that year is $39,000. For the second year, the depreciation allowance is (1/4)(39,0006000) = 8250, and the book value at the end of that year is 39,000  8250 = 30,750. If straightline depreciation had been used, the depreciation allowance each year would be 44,000*(1/8) = 5500. Since that is less than the doubledeclining balance value, the double declining balance method can be used for the second year. 
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