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Help Sa Use the following information for the Exercises below. The following inf

ID: 2511410 • Letter: H

Question

Help Sa Use the following information for the Exercises below. The following information applies to the questions displayed below In early January 2017, NewTech purchases computer equipment for $259,000 to use in operating activities for the next four years. It estimates the equipment's salvage value at $27,000 Exercise 10-8 Double-declining-balance depreciation LO P1 Prepare a table showing depreciation and book value for each of the four years assuming double-declining-balance depreciation. (Enter all amounts positive values.) iation for the Period End of Period Year Beginning-Year Depreclation Annual Accumulated Year-End Book Value Rate Depreciation Depreciation Book Value 2017 $232.000 2018 2019 116,000 58,000 Prev3 of 9Next >

Explanation / Answer

Note : Double - decline - balance (DDB) depreciation = 2 * SLM rate * Book value at the beginning of the year.

Where SLM rate = 1/ estimated useful life = 1 /4 years = 25 % , thus DDB rate = 25 *2 = 50 %

Beginning Year Book Value ($)

[A]

Depreciation Rate

[B]

Annual Depreciation ($)

[C] = A* B

Accumulated Depreciation ($)

[D] = C + Previous row of D

Year End Book Value ($)

[E] = A- C

Note : Under DDB method , depreciation ceases when book value = salvage value . that means we can charge depreciation till the point where book value becomes equal to salvage value. Thus in year 2020 maximum depreciation can be charged is $2,000 so that year end book value matches with the salvage value.

Depreciation for the period End of Period Year

Beginning Year Book Value ($)

[A]

Depreciation Rate

[B]

Annual Depreciation ($)

[C] = A* B

Accumulated Depreciation ($)

[D] = C + Previous row of D

Year End Book Value ($)

[E] = A- C

2017 232,000 50 % 116,000 116,000 116,000 2018 116,000 50 % 58,000 174,000 58,000 2019 58,000 50 % 29,000 203,000 29,000 2020 29,000 29,000 - 27,000 = 2,000* 205,000 27,000 Total 205,000