Final answer:
The double-declining-balance method of depreciation is calculated by multiplying the book value at the start of the year by two times the straight-line depreciation rate. The rate is based on the asset's useful life, and this method results in higher depreciation costs earlier in the asset's life.
Step-by-step explanation:
The formula to calculate depreciation using the double-declining-balance method is:
Depreciation Expense = 2 x (Straight-line depreciation rate) x (Book value at the beginning of the year)
The straight-line depreciation rate is determined by dividing 1 by the useful life of the asset. The book value at the beginning of the year is the cost of the asset minus any accumulated depreciation from previous years. This method accelerates the depreciation expense earlier in the life of the asset.
For example, if an asset has a useful life of 5 years, the straight-line depreciation rate is 1/5, or 20%. The double-declining balance rate is 40%. If the beginning book value is $1,000, then the depreciation expense for the first year is 40% of $1,000, which is $400.