Question

Lundy Company purchased a depreciable asset for $99,000 on January 1. The estimated salvage value is $18,000, and the estimated useful life is 9 years. The double-declining balance method will be used for depreciation. What is the depreciation expense for the second year on this asset?
Please round the double-declining balance rate to 2 decimal places, e.g. 0.35 or 35% in your intermediate calculations.

$11,000

$17,820

$13,900

$16,988

Answer 1

Answer)

Calculation of depreciation for second year under double declining balance method

First year:

Depreciation = original cost of the Asset X rate of depreciation under straight line method X 2

                         = $ 99,000 X 11.11% X 2

                         = $ 22,000

Second year:

Depreciation = (Original cost – Depreciation for first year) X rate of depreciation under straight line method X 2

                               = ($ 99,000 - $ 22,000) X 11.11% X 2

                              = $ 16,988 (Approximately)

Working Note:

Calculation of rate of depreciation under straight line method

Rate of depreciation under Straight line Method = 1/ useful life of the asset

                                                                                          = 1/9 years

                                                                                          = 11.11%