Question

For a newly setup classroom, a projector system is purchased for $10,000. The resale value is estimated to be $1,000 at the end of 5 years useful life of the system. Calculate the depreciation charge for the third year and fourth year by applying the 'Double Declining Meth Method'.

Answer 1

Under double declining balance method, depreciation is calculated by the following formula:

Double declining rate = 2 / Useful life * 100

Double declining rate = 2 / 5 * 100 = 40%

Depreciation for various years is given below:

For first year:

Depreciation = 40% * $10000 = $4000

Net book value remaining at the end = $10000 - $4000 = $6000

For second year:

Depreciation = 40% * $6000 = $2400

Net book value remaining at the end = $6000 - $2400 = $3600

For third year:

Depreciation = 40% * $3600 = $1440

Net book value remaining at the end = $3600 - $1440 = $2160

For fourth year:

Depreciation = 40% * $2160 = $864