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7 February, 08:43

An asset is purchased by a calendar or fiscal year firm for $60,000 on October 1, 1997. The asset has a useful life of four years and salvage value of $10,000. Depreciation for 1998 under the double declining balance method is $26,250.1. True2. False

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  1. 7 February, 11:23
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    1. True

    Explanation:

    The computation of the depreciation for 1998 under the double declining balance method is shown below:

    First we have to find the depreciation rate which is

    = One : useful life

    = 1 : 4

    = 25%

    Now the rate is double So, 50%

    In year 1, the original cost is $60,000, so the depreciation is $7,500 after applying the 50% depreciation rate and the 3 months

    And, in year 2, the depreciation expense is

    = ($60,000 - $7,500) * 50%

    = $26,250
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