Question

In early January 2017, NewTech purchases computer equipment for $264,000 to use in operating activities for the next four years. It estimates the equipment’s salvage value at $28,000.

Exercise 8-8 Double-declining-balance depreciation LO P1

Prepare a table showing depreciation and book value for each of the four years assuming double­declining­balance depreciation. (Enter all amounts positive values.)

	Depreciation for the Period			End of Period
Year	Beginning­Year Book Value	Depreciation Rate	Annual Depreciation	Accumulated Depreciation	Year­End Book Value
2017
2018
2019
2020
Total

Answer 1

• Workings

A	Cost	$          264,000.00
B	Residual Value	$            28,000.00
C=A - B	Depreciable base	$          236,000.00
D	Life [in years]	4
E=C/D	Annual SLM depreciation	$            59,000.00
F=E/C	SLM Rate	25.00%
G=F x 2	DDB Rate	50.00%

Year	Beginning Book Value	Depreciation rate	Depreciation expense	Ending Book Value	Accumulated Depreciation
1	$    264,000.00	50.00%	$       132,000.00	$           132,000.00	$      132,000.00
2	$     132,000.00	50.00%	$         66,000.00	$             66,000.00	$      198,000.00
3	$       66,000.00	50.00%	$         33,000.00	$             33,000.00	$      231,000.00
4	$       33,000.00		$         5,000.00	$             28,000.00	$      236,000.00

• Answer

	Depreciation for the Period			End of Period
Year	Beginning­Year Book Value	Depreciation Rate	Annual Depreciation	Accumulated Depreciation	Year­End Book Value
2017	$ 264,000.00	50.00%	$ 132,000.00	$ 132,000.00	$ 132,000.00
2018	$ 132,000.00	50.00%	$    66,000.00	$ 198,000.00	$    66,000.00
2019	$    66,000.00	50.00%	$    33,000.00	$ 231,000.00	$    33,000.00
2020	$    33,000.00		$      5,000.00	$ 236,000.00	$    28,000.00
Total			$ 236,000.00