Question

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).

Answer 1

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