Question

A surface mount placement machine is being purchased for $1986000; it has an estimated useful life of 8 years and a salvage value of $90000 at that time. Determine the depreciation allowance for the 5th year and the book value at the end of the 5th year using Double Declining Balance.
what is the depreciation rate?  %
d₅ = $  
B₅ = $

Answer 1

Salvage Value = $90000

Useful life = 8 years

Depreciation under double declining method

Depreciable Base = $1986000 – $90000 = $1,896,000

Depreciation Expense = $1,896,000 / 8 = 237,000

Straight-Line Depreciation Rate= 237,000 / $1,896,000 = 0.125 or 12.5%

Double-Declining Depreciation Method = 12.5%*2 = 25%

Year	Book value at the beginning	Depreciation	Book value at the end
1	$1986000	496,500	1489500
2	1489500	372,375	1117125
3	1117125	279,281.25	837843.75
4	837843.75	209,461	628382.75
5	628382.75	157,096	471,286.75