In early January 2015, NewTech purchases computer equipment for $154,000 to use
ID: 2454825 • Letter: I
Question
In early January 2015, NewTech purchases computer equipment for $154,000 to use in operating activities for the next four years. It estimates the equipment’s salvage value at $25,000.
Prepare a table showing depreciation and book value for each of the four years assuming double-declining-balance depreciation.
year -beginning year book value -depreciation rate- Annual depreciation -Accumulated depreciation -year end book value
2015
2016
2017
2018
total
In early January 2015, NewTech purchases computer equipment for $154,000 to use in operating activities for the next four years. It estimates the equipment’s salvage value at $25,000.
Explanation / Answer
Depreciation rate = 1/useful life *2
Depreciation rate = 1/4*2
Depreciation rate = 50%
Note : Under double-declining-balance depreciation method dsepreciation is charged upto salvage value
Year Beginning Year book value depreciation rate Annual depreciation Accumulated depreciation - year end book value [a] [b] [c = a*b] [d = previous year accumulated depreciation + c] [e = a - b] 2015 154000 50% 77000 77000 77000 2016 77000 50% 38500 115500 38500 2017 38500 35.06% 13500 129000 25000 2018 25000 0% 0 129000 25000