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?
Practice Questions
1 question
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
First year's depreciation using double declining balance is calculated as (Cost x 2 / Useful Life) = ($50,000 x 2 / 10) = $10,000.
Questions & Step-by-step Solutions
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Q
Q: 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?
Solution: First year's depreciation using double declining balance is calculated as (Cost x 2 / Useful Life) = ($50,000 x 2 / 10) = $10,000.
Steps: 5
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.
