Question

An asset is purchased by a calendar or fiscal year firm for $60,000 on October 1, 1997. The asset has a useful life of four years and salvage value of $10,000. Depreciation for 1998 under the double declining balance method is $26,250.1. True2. False

Answer 1

Answer:

1. True

Explanation:

The computation of the depreciation for 1998  under the double declining balance method is shown below:

First we have to find the depreciation rate which is

= One ÷ useful life

= 1 ÷ 4

= 25%

Now the rate is double So, 50%

In year 1, the original cost is $60,000, so the depreciation is $7,500 after applying the 50% depreciation rate  and the 3 months

And, in year 2, the depreciation expense is

= ($60,000 - $7,500) × 50%

= $26,250