The Tao Inc. purchased an asset for $170,000 with a salvage value of $8,500 have a useful life of four years. Find the depreciation expense for the first year using the 150% declining balance method.
To find the depreciation expense for the first year using the 150% declining balance method, we need to follow these steps:
Step 1: Determine the initial depreciable cost of the asset.
The initial depreciable cost is the original cost of the asset minus the salvage value. In this case, it is calculated as $170,000 - $8,500 = $161,500.
Step 2: Calculate the depreciation rate.
The depreciation rate for the 150% declining balance method is computed as (1 / Useful Life) * 150%. In this case, it is (1 / 4) * 150% = 0.25 * 1.5 = 0.375 or 37.5%.
Step 3: Determine the depreciation expense for the first year.
The depreciation expense for the first year is found by multiplying the depreciation rate by the initial depreciable cost. Therefore, it is $161,500 * 37.5% = $60,562.50.
Therefore, the depreciation expense for the first year using the 150% declining balance method is $60,562.50.