Question

A building is acquired on January 1, at a cost of $1,000,000 with an estimated useful life of 10 years and salvage value of $90,000. Compute depreciation expense for the first three years using the double-declining-balance method. (Round your answers to the nearest dollar.) Depreciation for the Period End of Period Beginning of Period Book Value Accumulated Depreciation Depreciation Rate (%) Depreciation Expense Annual Period Book Valuo First Year Second Year Third Year

Answer 1

Solution

	Depreciation for the period			End of period
Annual period	Beginning year book value	Depreciation rate	Annual depreciation	Accumulated depreciation	Year end Book value
First Year	$   1,000,000.00	20.00%	$        200,000.00	$      200,000.00	$        800,000.00
Second year	$       800,000.00	20.00%	$        160,000.00	$      360,000.00	$        640,000.00
Third year	$       640,000.00	20.00%	$        128,000.00	$      488,000.00	$        512,000.00

Working

Double declining Method
A	Cost	$ 1,000,000
B	Residual Value	$ 90,000
C=A - B	Depreciable base	$ 910,000
D	Life [in years]	10
E=C/D	Annual SLM depreciation	$ 91,000
F=E/C	SLM Rate	10.00%
G=F x 2	DDB Rate	20.00%