How is the double declining balance method calculated?
Practice Questions
1 question
Q1
How is the double declining balance method calculated?
Asset cost divided by useful life multiplied by 2.
Asset cost multiplied by 2 divided by useful life.
Asset cost minus salvage value divided by useful life.
Asset cost multiplied by salvage value.
The double declining balance method calculates depreciation by taking the asset's cost, multiplying it by 2, and then dividing by the useful life.
Questions & Step-by-step Solutions
1 item
Q
Q: How is the double declining balance method calculated?
Solution: The double declining balance method calculates depreciation by taking the asset's cost, multiplying it by 2, and then dividing by the useful life.
Steps: 7
Step 1: Determine the cost of the asset. This is the amount you paid for it.
Step 2: Find out the useful life of the asset. This is how many years you expect to use it.
Step 3: Calculate the straight-line depreciation rate by taking 1 divided by the useful life.
Step 4: Double the straight-line depreciation rate. This is your double declining rate.
Step 5: Multiply the asset's cost by the double declining rate to find the first year's depreciation.
Step 6: Subtract the first year's depreciation from the asset's cost to get the book value at the end of the first year.
Step 7: For the next year, repeat steps 5 and 6 using the new book value.
