Question

For each of the following depreciable assets, determine the missing amount. Abbreviations for depreciation methods are SL for straight-line and DDB for double-declining-balance.

Asset Cost Residual Service Life Depreciation Depreciation
Value (Years) Method (Year 2)
A 31,000 5 DDB $30,000
B 30,000 8 SYD 35,00
C 87,000 6,000 SL 9,000
D 252,000 21,000 10 23,100
E 211,000 3,100 8 150%DB

Answer 1

Asset Cost Residual Service Life Depreciation Depreciation

Value (Years) Method (Year 2)

A $125,000 $31,000 5 DDB $30,000

B $30,000 $12,000 8 SYD $3,500

C $87,000 $6,000 9 SL $9,000

D $252,000 $21,000 10 straight line $23,100

E $211,000 $3,100 8 150%DB $32,144.53

A) double declining balance:

2 x 1/5 x 0.6cost = $30,000

0.6cost = $30,000 / 0.4 = $75,000

cost = $75,000 / 0.6 = $125,000

B) 8 + 7 + 6 + 5 +4 + 3 + 2 + 1 = 36

depreciation year 2 = 7/36 x ($30,000 - residual value) = $3,500

$30,000 - residual value = $3,500 x 36/7 = $18,000

residual value = $30,000 - $18,000 = $12,000

C) straight line depreciation per year = net depreciable value / useful life

$81,000 / useful life = $9,000

useful life = $81,000 / $9,000 = 9

D) straight line since depreciation per year x useful life = net depreciable value

$23,100 x 10 = $231,000

E) 150% double declining

year 1 = 1.5 x 1/8 x $211,000 = $39,562.50

year 2 = 1.5 x 1/8 x $171,437.50 = $32,144.53