Question

An equipment at MNS Systems costing $600,000 was depreciated using the double declining balance (DDB) method. In year four, the company decided to switch to the straight-line depreciation method. Determine the depreciation charges in year 4. Assume a depreciable life of 10 years and a salvage value of $63,331.

Answer 1

Depreciation rate = 1 / Years = 1 / 10 = 10%

From year 1 to 3, there is double declining depreciation method, which means there would be depreciation of 20% of beginning balance of each year.

From year 4, there is depreciation per year equal to (307,200 - 63,331) / 7 = 34,838.43

Year	Beginning Value	Depreciation	Ending Balance
1	600000	120000	480000
2	480000	96000	384000
3	384000	76800	307200
4	307200	34838.43	272361.6
5	272362	34838.43	237523.1
6	237523	34838.43	202684.7
7	202685	34838.43	167846.3
8	167846	34838.43	133007.9
9	133008	34838.43	98169.43
10	98169.4	34838.43	63331

At the end of year 10, we are left with 63,331 of salvage value.