During 2012, the company changed from the double-declining-balance method for it
ID: 2376775 • Letter: D
Question
During 2012, the company changed from the double-declining-balance method for its building to the straight-line method. The building originally cost $625000. It had a useful life of 10 years and a salvage value of $50000. The following computations present depreciation on both bases for 2010 and 2011.
2011
2010
Straight-line
$ 57,500
$ 57,500
Declining-balance
$ 92,000
$ 115,000
During 2012, the company changed from the double-declining-balance method for its building to the straight-line method. The building originally cost $625000. It had a useful life of 10 years and a salvage value of $50000. The following computations present depreciation on both bases for 2010 and 2011.
2011
2010
Straight-line
$ 57,500
$ 57,500
Declining-balance
$ 92,000
$ 115,000
Explanation / Answer
Book Value in the beginning of year 2012 = $418000
Salvage value at the end of life = 50000
Remaining Life = 8 years
Depreciation for 2012 as per SLM = 418000-50000/8 = $46000
This depreciation is to be charged for next 7years
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