Question

Use the following information for the Exercises below. The following information applies to the questions displayed below) NewTech purchases computer equipment for $272,000 to use in operating activities for the next four years. It estimates the equipment's salvage value at $20,000 Exercise 10-8 Double-declining-balance depreciation LO P1 Prepare a table showing depreciation and book value for each of the four years assuming double-declining balance depreciation (Enter all amounts positive values.) Depreciation for the Period End of Period Year End Year Beginning. Year Depreciation Book Value Rate Annual Depreciation Accumulated Depreciation Year

Answer 1

Double declining balance method:
	Double declining balance depreciation rate = 2 * 1 / life of assets
		2 * 1 / 4
		0.50
	*Depreciation = Remaining value at the beginning of the year * Double declining balance depreciation rate
	Year	Beginning year	Depreciation	Annual	Accumulated	Year End
		book value (a)	Rate (b)	Depreciation (a*b)	Depreciation	book value (a - b)
	1	$272,000	0.5	$136,000	$136,000	$136,000
	2	$136,000	0.5	$68,000	$204,000	$68,000
	3	$68,000	0.5	$34,000	$238,000	$34,000
	4	$34,000	0.5	$14,000	$252,000	$20,000
	* Accumulated depreciation for current year = Current year depreciation + Previous year accumulated depreciation
	*In double declining balance method the book value at the end of year is the residual value of the assets, so the depreciation
	would be calculated by the following way:
	Depreciation =   Remaining value at the beginning - Residual value
		=$34,000- 20000 =$14000