Question

Instruction: Fill in the blanks. Do not use thousand separator, use 2 decimal places only (i.e. 1000.00 instead of 1,000). What is the double declining five-year depreciation schedule for a truck that was purchased for Php5M with a residual value of Php500,000? Fill up the Depreciation and Net Value for each year. Depreciation Net Book Value

Answer 1

Depreciation Net Book Value Year-1 Year-2 Year-3 2000000.00 1200000.00 720000.00 3000000.00 1800000.00 1080000.00 Year-4 432000.00 648000.00 Year-5 148000.00 500000.00 Workings: Under Double Declining Balance (DDB) method, Depreciation percentage = (1 / Useful life of the asset) x 2 Therefore, Depreciation percentage = (1/5) x 2 = 40% (Under DDB method, depreciable cost should be cost of the asset as it doesn't consider resale value in its depreciation calculation unless the book value goes below estimated residual value in any of the years) Depreciation Schedule Depreciation for the year Asset Depreciable Depreciation Accumulated Net Book Year Cost Balance Expense Depreciation Value 1 5000000.00 5000000.00 40% 2000000.00 2000000.00 3000000.00 [Dep. Expns. = 5000000 x 40% = 2000000; Book value = 5000000 - 2000000 = 3000000] 3000000.00 1200000.00 3200000.00 1800000.00 [Dep. Expns. = 3000000 x 40% = 1200000; Book value = 3000000 - 1200000 = 1800000] 1800000.00 720000.00 3920000.00 1080000.00 [Dep. Expns. = 1800000 x 40% = 720000; Book value = 1800000 - 720000 = 1080000] 1080000.00 40% 432000.00 4352000.00 648000.00 [Dep. Expns. = 1080000 x 40% = 432000; Book value = 1080000 - 432000 = 648000] 648000.00 40% 148000.00 4500000.00 500000.00 [Dep. Expns. = 648000 - 500000.00 = 148000; Book value = 648000 - 148000 = 500000] Dep. % . 40% 40% NOTE: As the net book value cannot go below its estimated residual value of 500000.00 at the end of year-5, depreciation expense for year-5 is calculated as difference between book value of the asset at the end of year-4 (648000.00) and 500000.00, which is equal to 148000.00.