Answer:
The amount of annual depreciation for year 2 is: $84000
Explanation:
The double-declining balance method of depreciation is a form of accelerated depreciation. This means that compared to the straight-line method, the depreciation expense will be faster in the early years of the asset's life but slower in the later years. The total amount of depreciation expense during the life of the assets will be the same. It makes sense to use this method with assets that lose value quickly.
The Formula for DDB Depreciation Is
Depreciation= (2x SLDPc) x (Price purchase - accumulated depreciation)
Where:
SLDP = Straight-line depreciation percent Coeficient
Example of Double Depreciation Method:
As a hypothetical example, suppose a business purchased a $60,000 machine, which was expected to last for 10 years. After 10 years, it would be worth $6,000, its salvage value. Under the straight-line depreciation method, the company would deduct $5,400 per year for 10 years (60000-6000)/10
Using the double-declining balance method, however, it would deduct 20% of $60,000 ($12,000) in year one, 20% of $48,000 ($9,600) in year two, ($7,680) in year three, and so on.
<u>In this exercise</u>
<u></u>
Price= $350.000
Useful life= 5 year
Total depreciable amount= $350000-35000= $315000
Depreciation year 1= (2*0,20)*(350000-0) = 140000
<u>Depreciation year 2= 0,40*(350000-140000)= 84000</u>
Depreciation year 3= 0,4*(350000-224000)= 50400
Depreciation year 4= 0,4*(350000-274400)=30240
Depreciation year 5= 0,4*(350000-304640)=18144
