Answer:
The depreciation for the year 4 is $54,857.
Explanation:
The double declining depreciation method would be used which is as under:
Double Declining depreciation = (Cost - Acc. Depreciation) * 2 / Useful life
Now by putting values, we have:
Y1 Depreciation = ($750,000 - 0) * 2 / 10 years = $150,000
Y2 Depreciation = ($750,000 - 150,000) * 2 / 10 years = $120,000
Y3 Depreciation = ($750000 - $150,000 - $120,000) * 2 / 10 years
= $96,000
Now from year 3 onward, the depreciation method was straight-line and which can be calculated as under:
Straight-line Depreciation = (Cost - Salvage value) / Useful Life
Here
Cost = $750000 - $150,000 - $120,000 - $96,000= $384,000
Remainder life is 7 years
Now by putting values, we have:
Y4 Depreciation = ($384,000 - 0) / 7 years = $54,857
