Question

Required information (The following information applies to the questions displayed below.) In early January 2017, NewTech purchases computer equipment for $262.000 to use in operating activities for the next four years. It estimates the equipment's salvage value at $21,000. 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 Beginning-Year Book Value Depreciation Rate Annual Depreciation Accumulated Depreciation Year-End Book Value 2017 2018 2019 2020 Total S ol

Answer 1

Asset cost - $2,62,000

Salvage Value - $21,000

Useful no of years - 4

In double declining balance method depreciation is charged at rate double to the straight line method. In straight line method the useful life is 4 years, if we convert 4 years into a percentage using a simple calculation i.e. if the cost is 100%, every year it has to be depreciated by 100%/4 = 25%. So in double declining balance method it has to be depreciated at 50% of NBV.

Beginning book value is = $2,62,000

For the fourth year the depreciation is adjusted to $ 11,750.00 to bring the asset to the book value of $21,000.00

	Depreciation for the Period			End of period
Year	Beginning book value	Depreciation rate	Annual depreciation	Accumulated Depreciation	Year end book value
2017	$2,62,000.00	50.00%	$1,31,000.00	$1,31,000.00	$1,31,000.00
2018	$1,31,000.00	50.00%	$65,500.00	$1,96,500.00	$65,500.00
2019	$65,500.00	50.00%	$32,750.00	$2,29,250.00	$32,750.00
2020	$32,750.00	50.00%	$11,750.00	$2,41,000.00	$21,000.00
Total			$2,41,000.00