Posted by Kara on Thursday, July 9, 2009 at 12:34am.
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?

Math  drwls, Thursday, July 9, 2009 at 9:11am
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.

Math  Anonymous, Monday, January 9, 2012 at 12:47am
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