Question

A company purchased office equipment for $41000 and estimated a salvage value of $8200 at the end of its 5-year useful life. The constant percentage to be applied against book value each year if the double-declining-balance method is used is:

Answer 1

The constant percentage to be applied against book value each year is 40%

Step-by-step explanation:

Data provided in the question:

Cost of the equipment purchased by the company = $41,000

Estimated a salvage value = $8200

Useful life = 5 years

Now,

Under the double-declining-balance method,

the percentage rate of depreciation is given as;

=
`2*\frac{\textup{1}}{\textup{Useful life}}\100\%`

thus,

for Useful life of 5 years, we have

the percentage rate of depreciation =
`2*\frac{\textup{1}}{\textup{5}}\100\%`

or

the percentage rate of depreciation = 0.4 × 100%

or

the percentage rate of depreciation = 40%

Hence,

The constant percentage to be applied against book value each year is 40%