Question

Use the following information for the Exercises below.

[The following information applies to the questions displayed below.]

NewTech purchases computer equipment for $264,000 to use in operating activities for the next four years. It estimates the equipment’s salvage value at $28,000.

rev: 07_27_2017_QC_CS-94103

Exercise 8-8 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.)

Answer 1

We have purchased an asset for $264,000 and you expect it to have a life of 4 years with salvage value of $28,000. As per Double Decling Balance Method, we depreciate the asset at Factor 2, steps and calulation mentioned below
1. Straight-Line Depreciation Percent = 100% / 4 = 25%
2. Depreciation Rate = 25% x 200% = 50%
3. Depreciation for a Period = 50% x Book Value at Beginning of the Period
Depreciation for Period 1 = 50% x $264,000 = $132,000
For Periods 2 and greater, depreciation is 50% x ($264,000 - Accumulated Depreciation)
Depreciation for Period 2 = 50% x ($264,000 - $132,000 ) = $66,000
Adjust last year depreciation by calculating Net Book Value with Salvage Value
Year	Asset Value	Depreciation Rate	Depreciation	Book Value (Net)
1	2,64,000	50.00%	1,32,000	1,32,000
2	1,32,000	50.00%	66,000	66,000
3	66,000	50.00%	33,000	33,000
4	33,000	15.15%	5,000	28,000
Also, you can use Excel equivalent function for Declining Balance Method is DDB (cost,salvage,life,period,factor). With it you can calculate depreciation for the chosen period. "factor" defaults to 2, double declining balance method, but you can change it. To calculate depreciation by the double declining method you can use this calculator setting the factor = 2