Question

DeeDee uses the DDB method to depreciate office equipment. No office equipment was added during 2019. It is estimated that the office equipment has a useful life of 20 years with a salvage value of $4,000. Prior depreciation was correctly calculated based on period of time held.

Unadjusted Trial Balance:

Office Equipment 250,000(DR)

Accumulated Depreciation - Office Equipment 25,000 (CR)

What is the adjusting journal entry?

Answer 1

The Journal entry for the year 2019

Date	Particulars	Debit	Credit
31-12-2019	Depreciation Expense A/c	22500
	Accumulated Depreciation A/c		22500
	(Record depreciation under DDB method)

The annual depreciation rate in the Double Declining Balance method is the 2 times the percentage that would calculated under the straight line method and during the calculation that percntage will execute on net book value of the asset at the begining of the year.

From the infromation we got , we are assuming that the asset bought during 2018(ie previous year)

For 2018 depreciation the following working has been done

to find the depreciation base = Cost of the asset - salvage value = 250000 - 4000 = 246000

If straight line method is using the yearly depreciation rate will be 5% . Asset has 20 years of useful life so that yearly 5% will charge as depreciation.

Under double declining balance method, we will use 10% for the depreciation charge (that is double the depreciation rate will use under straightline method)

So the first year depreciation charged by RATE x BOOK VALUE OF THE ASSET BEGINING YEAR(here cost)

So depreciation charged by 25000(10% of 250000).

The current net book value for the 2019 will be 225000 (250000 - 1st year depreciation)

The depreciation amount will be 22500(10% of the net book value begining of the year)