Question

A boat is purchased for 1,000,000. It will be used for 20 years. At that time its salvage value will be 300,000. Calculate its depreciation allowance for each year, and its "book value" Bt, for each year for ten years using VDB. Explicitly show DDB and when (B_t-1 - F)/n-(t-1)>pB_t-1 (if happens within time frame).

Answer 1

Depreciation rate under DDB method = (1/20 yrs)*2 = 0.05*2 = 0.10 or 10%

Calculation of Depreciation and book value for 10 years (Amounts in $)

Year	Book Value at the beginning (A)	Depreciation (B = A*10%)	Accumulated Depreciation (C)	Book Value at the end (A - B)
1	1,000,000	100,000	100,000	900,000
2	900,000	90,000	190,000	810,000
3	810,000	81,000	271,000	729,000
4	729,000	72,900	343,900	656,100
5	656,100	65,610	409,510	590,490
6	590,490	59,049	468,559	531,441
7	531,441	53,144	521,703	478,297
8	478,297	47,830	569,533	430,467
9	430,467	43,047	612,580	387,420
10	387,420	38,742	651,322	348,678
Total		651,322