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NewTech purchases computer equipment for $267,000 to use in operating activities for the next four years. It estimates the equipment’s salvage value at $25,000.

rev: 07_27_2017_QC_CS-94103

Exercise 8-8 Double-declining-balance depreciation LO P1

Prepare a table showing depreciation and book value for each of the four years assuming double-declining-balance depreciation. (Enter all amounts positive values.)

	Depreciation for the Period			End of Period
Year	Beginning-Year Book Value	Depreciation Rate	Annual Depreciation	Accumulated Depreciation	Year-End Book Value
Year 1
Year 2
Year 3
Year 4
Total

Answer 1

Double Declining Balance method
Double declining Balance depreciation = 2 × Straight-line depreciation rate × Book value at the beginning of the year
Depreciation rate = 100% / Life of the Asset
= 100%/4
=25%
Depreciation rate under Double Declining Rate = 2 x 25% = 50%
Double Declining Balance method
Year	Net book value at the beginning of the year	Depreciation Rate	Annual Depreciation @50%	Accumuated Depreciation	Net book valueat the end of the year
Year 1	2,67,000	50%	1,33,500	1,33,500	1,33,500
Year 2	1,33,500	50%	66,750	66,750	66,750
Year 3	66,750	50%	33,375	33,375	33,375
Year 4	33,375	25%	8,375	41,750	25,000
Total			2,42,000