Homework Answers
| 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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