Question

Using double-declining balance method, how much is the accumulated depreciation for the third year (round up to zero decimal point)?

cost: $30,000
salvage value: $3,000
useful life: 3 years

O $29,000
O $28,000
O $27,000
O $26,000

Answer 1

The accumulated depreciation for the third year, using the double-declining balance method, would be $33,330.

Step-by-step explanation:

The double-declining balance method is a depreciation method that allows for a larger deduction in the earlier years of an asset's life and gradually decreases over time. In this case, the cost of the asset is $30,000 and the salvage value is $3,000. The useful life is given as 3 years.

To calculate the annual depreciation expense, we first need to calculate the depreciation rate. The formula for the double-declining balance method is:

Depreciation Rate = 2 / Useful Life

Depreciation Rate = 2 / 3 = 0.667 (rounded to 3 decimal places)

The depreciation expense for the first year would be:

Depreciation Expense Year 1 = Cost x Depreciation Rate = $30,000 x 0.667 = $20,010 (rounded to the nearest dollar)

The accumulated depreciation for the first year would be equal to the depreciation expense for the first year. Therefore:

Accumulated Depreciation Year 1 = Depreciation Expense Year 1 = $20,010 (rounded to the nearest dollar)

To calculate the accumulated depreciation for the third year, we need to calculate the annual depreciation expense for the second year:

Depreciation Expense Year 2 = Book Value at the beginning of Year 2 x Depreciation Rate = ($30,000 - Accumulated Depreciation Year 1) x 0.667 = ($30,000 - $20,010) x 0.667 = $6,660 (rounded to the nearest dollar)

Now we can calculate the accumulated depreciation for the third year:

Accumulated Depreciation Year 3 = Accumulated Depreciation Year 2 + Depreciation Expense Year 2 = $26,670 + $6,660 = $33,330 (rounded to the nearest dollar)

Therefore, the accumulated depreciation for the third year would be $33,330.