Question

Required information [The following information applies to the questions displayed below.] In early January 2017, NewTech purchases computer equipment for $268,000 to use in operating activities for the next four years. It estimates the equipment’s salvage value at $30,000. rev: 07_27_2017_QC_CS-94103 Prepare a table showing depreciation and book value for each of the four years assuming double-declining-balance depreciation. (Enter all amounts positive values.)

Answer 1

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

	Depreciation	Book value
2017	$134,000 [($268,000)/4*2]	$134,000 ($268,000-$134,000)
2018	$67,000 [($268,000-$134,000)/4*2]	$67,000 ($268,000-$134,000-$67,000)
2019	$33,500 [($268,000-$134,000-$67,000)/4*2]	$33,500 ($268,000-$134,000-$67,000-$33,500)
2020	$3,500	$30,000 ($268,000-$134,000-$67,000-$33,500-$3,500)

Depreciation in 2020 = ($268,000-$134,000-$67,000-$33,500)/4*2

= $16,750

Under Double-declining-balance method, Depreciation cannot be made below the salvage value.

So, Deprectaion in the year 2020 is limited to $3,500