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Exercise 8-8 Double-declining-balance depreciation LO P1 In early January 2015, NewTech purchases computer equipment for $154,000...

Exercise 8-8 Double-declining-balance depreciation LO P1 In early January 2015, NewTech purchases computer equipment for $154,000 to use in operating activities for the next four years. It estimates the equipment’s salvage value at $25,000. Prepare a table showing depreciation and book value for each of the four years assuming double-declining-balance depreciation.

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Answer #1

Depreciation under Double-declining balance method = (Cost - Accumulated depreciation) / Useful life * 2

Year Cost Depreciation Accumulated depreciation Book value
2015 $154,000 $77,000 [($154,000-$0)/4*2] $77,000 $77,000
2016 $154,000 $38,500 [($154,000-$77,000)/4*2] $115,500 $38,500
2017 $154,000 $13,500 ($38,500-$25,000) $129,000 $25,000
2018 $154,000 $0 $129,000 $25,000

* Depreciation in 2017 = $19,250 [($154,000-$115,500)/4*2]

In Double declining balance method deprecition cannot be made below the salvage value.

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