Answer:
Year 1 = $196,000
Year 2= $156,800
Year 3= $125,440
Explanation:
Double-declining-balance rate = 100% / 10 years x 2 = 20%. Computation of annual depreciation expense are as follows;
Year 1
$980,000 x 20 % = $196,000
Net book value
$980,000 - $196,000 = $784,000 (to be used as base for year 2)
Year 2
$784,000 x 20% = $156,800
Net book value
$784,000 - 156,800 = $627,200
Year 3
$627,200 x 20% = $125,440
Net book value
$627,200 - $125,440 = $501,760
*Salvage value is ignored in computing the yearly depreciation expense under double-declining-balance method. The reason of it is that, it will take longer to depreciate an asset compare to it’s useful life if we deduct salvage value from original cost in depreciating an asset.
