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16 December, 17:13

A building acquired at the beginning of the year at a cost of $1,375,000 has an estimated residual value of $250,000 and an estimated useful life of 40 years. Determine (A) the double-declining-balance rate and (B) the double-declining-balance depreciation for the first year.

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  1. 16 December, 17:16
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    a. 5%

    b. $68,750

    Explanation:

    The computation is shown below:

    a. The double-declining balance rate would be

    = One : estimated useful life

    = 1 : 40 years

    = 0.025 or 2.5%

    Now the rate is double So, 5%

    b. In year 1, the original cost is $1,375,000, so the depreciation is $after applying the 5% depreciation rate is $68,750

    In mathematically, it would be

    = $1,375,000 * 5%

    = $68,750
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