Question

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An asset was purchased for $80,000. It has a 5 year life. The asset is expected to have a salvage value of $10,000 after the five years. Show the depreciation and remaining book value for this asset for each of the 5 years using Double Declining Balance depreciation.

Answer 1

Asset Value = $80,000

Life = 5 years

Salvage value = 10,000

Depreciation rate = 1 / Useful Life = 1 / 5 = 20%

Double declining balance formula = 2 * Depreciation Rate = 20% * 2 = 40%

Depreciation = 40% of Book Value at the beginning of the year.

Booking Value at the end of the year = Booking Value at the beginning of the year - Depreciation

Year	Book Value at the beginning of the year	Depreciation	Booking Value at the end of the year
1	80,000	32,000	48,000
2	48,000	19,200	28,800
3	28,800	11,520	17,280
4	17,280	6,912	10,368
5	10,368	368	10,000