Question

A building is acquired on January 1, at a cost of $960,000 with an estimated useful life of 10 years and salvage value of $86,400. Compute depreciation expense for the first three years using the double-declining-balance method.

Answer 1

Answer:

$468,480

Explanation:

The double-doubling method uses twice the rate of the straight-line method. The rate is (1/10 x 100) x 2 = 2(0.1 x 100 )= 20 per cent.

In the first year: the depreciation rate will be 20/100 x 960,000

=0.2 x 960,000

=$192,000

Second-year depreciation

=20/100 x (960,000 -192,000)

=0.2 x $768,000

=$153,600

Third-year depreciation

= 20/100 x (768,000 -153,600)

= 0.2 x $614,400

=$122, 880

Depreciation for the three years

= $192,000 + $153,600 + $122, 880

=$468,480