The vehicle that was contributed has a useful life of 5 years with a $2,000 salvage value. The company has decided to use the double declining balance method for depreciating these assets. The company treats all assets contributed or purchased during the month as being placed in service on the first day of the month for depreciation purposes. The cost of the equipment is on your unadjusted trial balance on the trial balance worksheet.
The cost of the equipment is on your unadjusted trial balance on the trial balance worksheet is calculated below:
Depreciation under double decline method = 1/useful years *100*2
Depreciation under double decline method = 1/5 Years *100*2
= 40%
Given that:
Salvage = $2,000
Useful in Years = 5
Cost of Equipment : ?
Cost of Equipment is calculated below:
Net book value of asset is amount will left at end of the year after deducting the depreciation currently(40%)
So Net book value is amount will = 60%.So at the end the salvage is also remain 60% = $2000
| Year | Book Value of Equipment | |
|---|---|---|
| Year 5 | = $2000/60% | $3,333.33 |
| Year 4 | = $3,333.33/60% | $5,555.55 |
| Year 3 | = $5,555.55/60% | $9259.26 |
| Year 2 | = $ $9259.26/60% | $15,432 |
| Year 1 | = $15,432/60% | $25,720 (Cost) |
The cost of the equipment is on your unadjusted trial balance on the trial balance worksheet is $25,720
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