Question
In: Finance
"Consider the following data on an asset Cost of the asset, I = $70,000 Useful life,...
"Consider the following data on an asset Cost of the asset, I = $70,000 Useful life, N = 7 years What is the book value at the end of the useful life if you depreciate according to the double-declining-balance (DDB) method?"
Solutions
Expert Solution
By Straight Line Methods, depreciation for first year would have been 1/7th of amount. So in Double Declining Method, first year depreciation would be 2/7th and would continue at the the same 2/7th level for 7 years.
This is how depreciation schedule would look like:
|
Depreciation = Previous Year Book Value * 2/7 |
Book Value |
|
|
Year 0 |
- |
70,000.0 |
|
Year 1 |
= (70,000 * 2/7) = 20,000.0 |
50,000.0 |
|
Year 2 |
= (50,000 * 2/7) = 14,285.7 |
35,714.3 |
|
Year 3 |
= (35,714.3 * 2/7) = 10,204.1 |
25,510.2 |
|
Year 4 |
= (25,510.2 * 2/7) = 7,288.6 |
18,221.6 |
|
Year 5 |
= (18,221.6 * 2/7) = 5,206.2 |
13,015.4 |
|
Year 6 |
= (13,015.4 * 2/7) = 3,718.7 |
9,296.7 |
|
Year 7 |
= (9,296.6 * 2/7) = 2,656.2 |
6,640.5 |
Book value at the end of Year 7 = $6,640.5
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