Question

A building is acquired on January 1, at a cost of $920,000 with an estimated useful life of 10 years and salvage value of $82,800. Compute depreciation expense for the first three years using the double-declining-balance method. (Round your answers to the nearest dollar.)

Answer 1

when you compute depreciation expense using the double declining method, the salvage value is not included in the depreciation calculation. You continue to depreciate the asset until you reach its salvage value:

1. depreciation expense year 1 = 2 x 1/10 x $920,000 = $184,000
2. depreciation expense year 2 = 2 x 1/10 x $736,000 = $147,200
3. depreciation expense year 1 = 2 x 1/10 x $588,800 = $117,760