Question

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.

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.