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Cost of asset = 8,00,000
Estimated residual value = 10% of the cost
Estimated useful life of asset = 5 years
Find the book value at the end of 1st year using double declining balance method.
a. 240000
b. 320000
c. 480000
d. 660000
Ans - c
Explanation
Depreciation rate = (1/useful life) x 200%
= 1/5 x 200% = 20% x 2 = 40%
[Year 1]
Depreciation amount for year 1
= beginning book value x depreciation rate
8,00,000 x 40% = 3,20,000
Accumulated depreciation at the end of year 1 = 3,20,000
Book value at the end of year 1
8,00,000 - 3,20,000 = 4,80,000
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Cost of asset = 8,00,000
Estimated residual value = 10% of the cost
Estimated useful life of asset = 5 years
Find the accumulated depreciation for the 2nd year using double declining balance method.
a. 312000
b. 424000
c. 512000
d. 604000
Ans - c
Explanation
Depreciation rate = (1/useful life) x 200%
= 1/5 x 200% = 20% x 2 = 40%
[Year 1]
Depreciation amount for year 1
= beginning book value x depreciation rate
8,00,000 x 40% = 3,20,000
Accumulated depreciation at the end of year 1 = 3,20,000
Book value at the end of year 1
8,00,000 - 3,20,000 = 4,80,000
[Year 2]
Depreciation amount for year 2
= beginning book value x depreciation rate
4,80,000 x 40% = 1,92,000
Accumulated depreciation at the end of year 2
3,20,000 + 1,92,000 = 5,12,000
.............................................
Cost of asset = 8,00,000
Estimated residual value = 10% of the cost
Estimated useful life of asset = 5 years
Find the book value at the end of 1st year using double declining balance method.
a. 240000
b. 320000
c. 480000
d. 660000
Ans - c
Explanation
Depreciation rate = (1/useful life) x 200%
= 1/5 x 200% = 20% x 2 = 40%
[Year 1]
Depreciation amount for year 1
= beginning book value x depreciation rate
8,00,000 x 40% = 3,20,000
Accumulated depreciation at the end of year 1 = 3,20,000
Book value at the end of year 1
8,00,000 - 3,20,000 = 4,80,000
[Year 2]
Depreciation amount for year 2
= beginning book value x depreciation rate
4,80,000 x 40% = 1,92,000
Accumulated depreciation at the end of year 2
3,20,000 + 1,92,000 = 5,12,000
Book value at the end of year 2
8,00,000 - 5,12,000 = 2,88,000
2,88,000 x 40% = 1,15,200
5,12,000 + 1,15,200 = 6,27,200
8,00,000 - 6,27,000 = 1,72,800
1,72,800 x 40% = 69,120
6,27,200 + 69,120 = 6,96,320
8,00,000 - 6,96,320 = 1,03,680
1,03,680 - 80,000 = 23,680
6,96,320 + 23,680 = 7,20,000
8,00,000 - 7,20,000 = 80,000
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