Athree-year-old machine has a cost of $73,000, an estimated residual value of $6,800, and an estimated useful life of five years. the company uses double-declining-balance depreciation. calculate the net book value at the end of each year.

$29,200 for year 1

$17,520 for year 2

Explanation:

To calculate the depreciation using the double declining- balance depreciation method, the first step is to divide 100% by the number of useful life (5years)

i.e: 100%

      5         = 20%

next step: because it is a double declining-balance method, the above gotten percentage is multiplied by 2.

i.e 20% × 2 = 40%

Having gotten the double depreciation percentage to be 40%, it is then used to calculate the depreciation by calculating 40% of the cost price ($73,000). That gives us,

40% of $73,000 = 40    ×   $73,000

                            100

                         = 0.4 × $73,000

                         = $29,200

The double declining-balance depreciation of that machine is $29,200 for year 1.

For the second year, double declining-balance depreciation is

($73,000-$29,200) x 0.4 (40%)

= $43,800 x 0.4

= $17,520

The double declining-balance depreciation for the second year is $17,520

n.b: the depreciation for other years are calculated following the same steps as above. Most important;y, depreciation will stop being calculated the year after depreciation is less than the residual value.

cheers.

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