Question

# An asset was purchased for \$60,000. It has a 6 year life. The asset is expected...

An asset was purchased for \$60,000. It has a 6 year life. The asset is expected to have a salvage value of \$7000 after the six years. Show the depreciation and remaining book value for this asset for each of the 6 years using Double Declining Balance depreciation. (Chapter 11). (Be careful not to have book value go below salvage value).

Time = 6years

Depreciation Base = Purchase value - Salvage value

Depreciation Base = 60000 - 7000 = 53000

Depretiation expense = 53000/6 = 8833.33

Straight line depreciation =[ 8833.33/53000] x 100 = 16.67%

Double declining depreciation = 16.67x2 = 33.34%

 year Depreciation rate Starting carrying value Depreciation expense End Carrying value 1 33.34% 60000 20004 39996 2 33.34% 39996 13334.67 26661.33 3 33.34% 26661.33 8888.89 17772.44 4 33.34% 17772.44 5925.33 11847.11 5 33.34% 11847.11 3949.83 7897.28 6 33.34% 7897.28 2632.95 5264.33

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