Question

At the beginning of 2016, Copland Drugstore purchased a new computer system for $52000. It is expected to have a five-year life and a $7000 salvage value.

Find the double-declining-balance depreciation for years 1-5.

Answer 1

Double Declining Balance Depreciation = Book Value at the beginning x Depreciation Rate

Depreciation Rate = 2 x [1 / Useful Life] = 2 x [ 1 / 5 ] = 40%

Double Declining Balance Depreciation Schedule

Year	Book Value at the beginning	Depreciation Rate	Annual Depreciation	Book Value at the end
1	52,000	40.00%	20,800	31,200
2	31,200	40.00%	12,480	18,720
3	18,720	40.00%	7,488	11,232
4	11,232	37.68%	4,232	7,000
5	-	-	-	-

The Asset has fully depreciated to it’s salvage value at the end of 4 year itself. Therefore, there e will not be any depreciation expense in year 5

Depreciation in Year 4 = $11,432 – 7,000 = $4,232