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Problem 1 An equipment at MNS Systems costing $600,000 was depreciated using the double declining balance (DDB) method. In ye
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Answer #1
Depreciation as per Straight Line Method (SLM)
= (Initial Value - Salvage Value)/ Useful life of asset
= (600000 - 100000)/10
= $50000 per year
Depreciation as per Double Declining Balance Method (DDB)
Step 1:-
Normal Depreciation Rate
= 1/Estimated Useful Life *100
= 10%
Step 2:-
Double Declining Depreciation rate
= 2 x Normal depreciation Rate
= 2 x 10%
= 20%

Depreciation as per double declining method will be on carrying value on previous year.

Statement Showing Depreciation Expense for each year
Year Rate Method Annual Depreciation Expense Accumulated Depreciation Carrying Value Depreciation As per
Double Declining Balance SLM
0 0 0 $600000
1 20% DDB 120000 120000 480000 120000 50000
2 20% DDB 96000 216000 384000 96000 50000
3 20% DDB 76800 292800 307200 76800 50000
Switchover From DDB to SLM Method => 4 - SLM 50000 342800 257200 61440 50000
5 - SLM 50000 392800 207200 51440 50000
6 - SLM 50000 442800 157200 41440 50000
7 - SLM 50000 492800 107200 31440 50000
8 - Balance 7200 500000 100000 21440 50000
9 - 0 0 500000 100000 20000 50000
10 - 0 0 500000 100000 20000 50000

Answer :- Depreciation for Year 4 is Option B. $50000/-

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