Question
Asked Dec 17, 2019
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Equipment acquired at the beginning of the year at a cost of $175,000 has an estimated residual value of $12,000 and an estimated useful life of 10 years. Determine (a) the doubledeclining- balance rate and (b) the double-declining-balance depreciation for the first year.

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Expert Answer

Step 1

Double-declining-balance method: It is an accelerated method of depreciation under which the depreciation declines in each successive year until the value of asset becomes zero. Under this method, the book value (original cost less accumulated depreciation) of the long-term asset is decreased by a fixed rate. It is double the rate of the straight-line depreciation. Use the following formula to determine the annual depreciation:

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2 Annual depreciation = Purchase price Useful li fe

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Step 2

(a)

 Determine the double-declining-balance rate.

Estimated useful ...

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100% Double-declining-bal ancerate Estimatedu sefullife 100% 10 years = 20%

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