Question

An asset has a cost of $50,000, with a residual value of $10,000. It has a life of 5 years and was purchased on January 1. Under double-declining-balance, what’s the asset’s fourth full year of depreciation expense?

Answer 1

The asset’s fourth full year of depreciation expense will be $6,666.67.

What is double-declining-balance?

An enhanced technique for recording loss over the lifetime of a product by adjusting the item's starting sales price by a discount factor.

An asset has a cost of $50,000, with a residual value of $10,000.

It has a life of 5 years and was purchased on January 1.

Then the asset’s fourth full year of depreciation expense will be

Annual depreciation = (cost – salvage value)/ useful life

Annual depreciation = (50000 – 10000) / 5 = $8,000

Year 1 Depreciation (for 10 months, from March to December) = $8,000 × 10/12 = $6,666.67.

More about the double-declining-balance link is given below.

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