Question

Asset cost is $68,000 (purchased on 4/1/X1), residual value is $8,000; Useful life of 4 years....

Asset cost is $68,000 (purchased on 4/1/X1), residual value is $8,000; Useful life of 4 years. What is year 1 depreciation expense using Double Declining? Optional Answers: 1. $12,750 2. $17,000 3. $25,500 4. $34,000

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Answer #1

The correct answer is 4. $34,000


Double Declining Depreciation Rate = 2 * Straight Line Method of Depreciation Rate (SLM rate) * Net Book Value at the beginning of the year

Cost of Asset / Net Book Value at the beginning of the year = $68,000

Step 1 -  Calculation of SLM rate
Depreciation Amount as per SLM = (Cost - Residual value) / Useful life of asset
= ($68,000 - $8,000) / 4

= $60,000 / 4

= $15,000

Rate of Depreciation = ($15,000 / $60,000) * 100

= 25% or 0.25

Step 2 - Calculation of Depreciation as per double declining method


Year 1 - Depreciation expense
= 2 * Straight Line Method of Depreciation Rate (SLM rate) * Net Book Value at the beginning of the year
= 2 * 0.25 * $68,000
= $34,000

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