Answer: Therefore, the annual depreciation for each year using the double-declining-balance method is $228,000 for the first three years, $194,000 for the fourth year, and $0 for the fifth year. The book value at the end of each year is as follows: $422,000 at the end of year 1, $194,000 at the end of year 2, $228,000 at the end of year 3, $0 at the end of year 4, and $80,000 at the end of year 5.
Explanation: To calculate the annual depreciation using the double-declining-balance method, we first need to calculate the depreciation rate, which is double the straight-line depreciation rate. The straight-line depreciation rate is calculated as follows:
Depreciation rate = (Cost - Salvage value) / Useful life
Depreciation rate = ($650,000 - $80,000) / 5 years = $114,000 per year
Double-declining-balance depreciation rate = 2 x straight-line depreciation rate = 2 x $114,000 = $228,000 per year
Using this depreciation rate, we can calculate the annual depreciation and book value at the end of each year as follows:
Year 1:
Depreciation = $228,000
Book value = Cost - Depreciation = $650,000 - $228,000 = $422,000
Year 2:
Depreciation = $228,000
Book value = Cost - Depreciation = $650,000 - $228,000 - $228,000 = $194,000
Year 3:
Depreciation = $194,000
Book value = Cost - Depreciation = $650,000 - $228,000 - $194,000 = $228,000
Year 4:
Depreciation = $228,000
Book value = Cost - Depreciation = $650,000 - $228,000 - $194,000 - $228,000 = $0
Year 5:
Depreciation = $0
Book value = Salvage value = $80,000