Question

DEPRECIATION
Calculate the complete depreciation table for an asset with a Cost Basis of $80,000, a Salvage Value of $20,000 and a useful life of 6 years with the Declining Balance 200% method with switchover to Straight Line Method.

Answer 1

Depreciation under straight line method = Depreciatiable value / useful life

= (80,000-20,000)/6 = $ 10,000

Double declining balance method (rate) = Depreciation under straight line method / Depreciatiable value × 200%

= 10,000/60,000 × 200% = 33.33% (i.e., 1/3rd)

(OR)

= 1/ useful life × 200%

= 1/6 × 200% = 33.33%

Depreciation table :

Year	Actual Depreciation	Accumulated Depreciation	Carrying value	Depreciation under Double declining balance method	Depreciation under straight line method
0			$ 80,000
1	$ 26,667	$ 26,667	(80,000-26,667) = $ 53,333	80,000×1/3 = $ 26,667*	$ 10,000
2	$ 17,776	(26,667+17,776) = $ 44,443	(53,333-17,776) = $ 35,557	53,333×1/3 = $ 17,776*	$ 10,000
3	$ 11,852	(44,443+11,852) = $ 56,295	(35,557-11,852) = $ 23,705	35,557×1/3 = $ 11,852*	$ 10,000
4	$ 3,705**	(56,295+3,705) = $ 60,000	$ 20,000	23,705×1/3 = $ 7,902	$ 10,000*
5	0	$ 60,000	$ 20,000	0	$ 10,000
6	0	$ 60,000	$ 20,000	0	$ 10,000

* Should be taken

** In the year 4 Depreciation method was switched over to straight line method from double declining balance method, and the Depreciation was reduced to $ 3,705 to maintain salvage value.