Question

The cost of an asset is $1,120,000, and that’s residual value is $210,000. Estimated useful life of the asset is eight years calculate depreciation for the first year using the double declining balance method of deprecation

Answer 1

Answer 2

Answer:

First-Year Depreciation = $280,000

Steps (Double Declining Balance Method):

1. Straight-Line Rate:

   $$\frac{1}{8\text{ years}}=12.5\mathrm{\%}\text{ per year}$$

2. Double the Rate:

   $$12.5\mathrm{\%}\times 2=25\mathrm{\%}\text{ (DDB rate)}$$

3. First-Year Depreciation:

   $$\mathrm{\$}1,120,000\times 25\mathrm{\%}=\boxed{{\displaystyle \mathrm{\$}280,000}}$$

Note:

• No residual value subtracted initially (unlike straight-line).

• Next years: Apply 25% to the remaining book value.