In a case study, a company has an asset with a cost of $50,000, a salvage value

What’s inside this PDF?

Question: In a case study, a company has an asset with a cost of $50,000, a salvage value of $5,000, and a useful life of 10 years. If using the double declining balance method, what is the first year\'s depreciation?

Options:

$5,000
$10,000
$9,000
$4,500

Correct Answer: $10,000

Solution:

First year\'s depreciation using double declining balance is calculated as (Cost x 2 / Useful Life) = ($50,000 x 2 / 10) = $10,000.

Practice Questions

Q1

In a case study, a company has an asset with a cost of $50,000, a salvage value of $5,000, and a useful life of 10 years. If using the double declining balance method, what is the first year's depreciation?

$5,000
$10,000
$9,000
$4,500

Questions & Step-by-Step Solutions

In a case study, a company has an asset with a cost of $50,000, a salvage value of $5,000, and a useful life of 10 years. If using the double declining balance method, what is the first year's depreciation?

Step 1: Identify the cost of the asset, which is $50,000.
Step 2: Identify the useful life of the asset, which is 10 years.
Step 3: Calculate the straight-line depreciation rate by dividing 1 by the useful life: 1 / 10 = 0.1 or 10%.
Step 4: Double the straight-line depreciation rate: 10% x 2 = 20%.
Step 5: Calculate the first year's depreciation by multiplying the cost of the asset by the doubled rate: $50,000 x 20% = $10,000.

Double Declining Balance Method – A method of accelerated depreciation that calculates depreciation based on a fixed percentage of the asset's book value at the beginning of each year.
Depreciation Calculation – Understanding how to calculate depreciation using different methods, including the formula for the double declining balance method.
Asset Cost, Salvage Value, and Useful Life – Knowledge of the components that affect depreciation calculations, including initial cost, expected salvage value, and useful life of the asset.

In a case study, a company has an asset with a cost of $50,000, a salvage value

What’s inside this PDF?

In a case study, a company has an asset with a cost of $50,000, a salvage value

Practice Questions

Questions & Step-by-Step Solutions

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