Question

# An equipment at MNS Systems costing \$600,000 was depreciated using the double declining balance (DDB) method....

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.

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.

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