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Question 4 A machine cont OO 000 A 1.2017. Its estimated svage was 90,000 and its expected teisight years (at) your answer ha
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Answer #1

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Double declining balance depreciation method is basically a method which provides extra depreciation in early years to reduce tax by reducing taxable income in earlier years. In this method 100% is divided by useful life and then the rate arrived at is doubled. Salvage value is ignored in this method. Calculation in current case is as follows :

Calculation of depreciation by double declining method
Calculation of Depreciation Rate under DDB : (100%/Useful life )*2 = (100%/8 years)*2 = 25%
Hence DDB Rate = 25%
Answer to A2
Year Depreciation Rate Beginning Balance Depreciation Closing Balance
1 25%                  9,00,000        2,25,000             6,75,000
2 25%                  6,75,000       1,68,750             5,06,250
3 . . . .
. . . . . (The depreciation from Year 3 to 8 has not been computed since we are only asked to calculate depreciation for 2nd year using DDB method.
. . . . .
. . . . .
. . . . .
. . . . .

Note : Since the answer in A1 has been provided considering the financial year to be from 1st April, 2017 to 31st March, 2018, we have also assumed the financial year to be from April to March and answered A2 accordingly.

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