The cost of an asset is $10,000,000 and its residual value is $100,000. Estimated useful life of the asset is four years. Prepare the schedule of depreciation using the double-declining-balance method of accounting.

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Business

Cindy Gilmore

9 August, 03:43

The cost of an asset is $10,000,000 and its residual value is $100,000. Estimated useful life of the asset is four years. Prepare the schedule of depreciation using the double-declining-balance method of accounting.

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Bailey Fields · Answer 1

The book value at the end of the fourth year is $625,000

Explanation:

The question is to prepare a schedule of depreciation through the double-declining balance method

First, we determine the rate of depreciation as follows

useful life is 4 years, therefore 100%/4 = 25%.

Since we are using double declining method = 25% x2 = 50%

The second step is to prepare the schedule

Beginning Depreciation Depreciation Accumulated Book Value

Book Value Rate Expense Depreciation

10,000,000 50% 5,000,000 5,000,000 5,000,000

5,000,000 50% 2,500,000 7,500,000 2,500,000

2500,000 50% 1,250,000 8,750,000 1,250,000

1,250,000 50% 625,000 9,375,000 625,000