Question

On July 1, 2021, Flax company acquired equipment for $1,500,000. Its estimated life was 5 years or 40,000 hours. The residual value was estimated as $100,000.

What was the balance in Accumulated Depreciation on December 31, 2022 if Flax company used the DDB method?

Answer 1

Answer: $780,000

Working:

Straight-lime method (SLM) depreciation rate = 1 / 5 = 0.20

So, Double Declining Balance (DDB) depreciation rate = 0.2 x 2 = 0.40 or 40%

(a) DDB depreciation schedule

Year	Cost ($)	Annual Depreciation ($)	Accumulated Depreciation ($)	Balance ($)
2021	1,500,000	300,000   (1,500,000*40%*6/12)	300,000	1,200,000
2022	1,200,000	480,000      (1,200,000*40%)	780,000 (300,000+480,000)	720,000