Question

A building is acquired on January 1, at a cost of $1,020,000 with an estimated useful life of 10 years and salvage value of $91,800. Compute depreciation expense for the first three years using the double-declining-balance method. (Round your answers to the nearest dollar.)

Answer 1

Answer:

For 1 year Depreciation = $204,000

For 2 year Depreciation = $163,200

For 3 year Depreciation = $130,560

Explanation:

The computation of depreciation expense is shown below:-

As per straight line method the annual depreciation = 100 ÷ 10

= 10%

Depreciation as per double decline method = 2 × Straight line method × Beginning value of each period

For 1 year Depreciation

2 × 10% × $1,020,000

= $204,000

Ending value = $1,020,000 - $204,000

= $816,000

For 2 year Depreciation

2 × 10% × $816,000

= $163,200

Ending Value = $816,000 - $163,200

= $652,800

For 3 year Depreciation

= 2 × 10% × $652,800

= $130,560