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What is the depreciation deduction, using the declining balance (DB) method with a 200% DB ratio,...

What is the depreciation deduction, using the declining balance (DB) method with a 200% DB ratio, associated with the third year for an asset that cost $35,000 and has an estimated MV of $9,000 at the end of its seven-year useful life? Express your answer in terms of dollars and cents, rounded to the nearest cent (e.g., 1234.56).

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Answer #1

Straight line method (SLM) depreciation rate = 1 / Useful life = 1/7

200% DB depreciation rate = 2 x SLM rate = 2 x (1/7) = 2/7

200% DB Depreciation schedule is as follows. This method ignores MV at end of project.

Year Year-Beginning Book Value ($) 200% DB Depreciation Rate Annual Depreciation ($) Year-End Book Value ($)
1 35,000.00 2/7 10,000.00 25,000.00
2 25,000.00 2/7 7,142.86 17,857.14
3 17,857.14 2/7 5,102.04 12,755.10
4 12,755.10 2/7 3,644.31 9,110.79
5 9,110.79 2/7 2,603.08 6,507.71
6 6,507.71 2/7 1,859.34 4,648.36
7 4,648.36 2/7 1,328.10 3,320.26

Depreciation deduction in year 3 = $5,102.04

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