In: Accounting
Meek Corporation acquires a building at $32,000 for an estimated useful life of 20 years. Meek estimates the building will have $12,000 residual value at the end of 20 years. Meek uses double declining balance method for depreciation. What's the depreciation expense at the end of second year? *
$1,680
$3,000
$2,880
$1,500
Correct Option C i.e. $2,880 | |||||
Calculation of depreciation by double declining balance method | |||||
Annual Depreciation by SLM = (32000 - 12000)/ 20 | |||||
=1000 | |||||
SLM Depretiation Rate = 1000/(32000 - 12000)*100 | |||||
=5% | |||||
Depreciation rate for Double Declining balance method = 5%*2 i.e. 10% | |||||
Year | Opening Carrying Value | Depreciation Expense | Accumulated Depreciation | Carrying Value | |
Year 0 | 32000 | ||||
Year 1 | 32000 | 3200 | 3200 | 28800 | |
Year 2 | 28800 | 2880 | 6080 | 25920 |