Answer:
First Year depreciation is $18,750
Second Year depreciation is $ 9,375
Explanation:
Note that the Method used to provide for Depreciation is Declining Balance Method.
The established rate is used to compute depreciation on the remaining balance after taking account of previous depreciation charges.
<u>Which is the appropriate rate to use?</u>
The question gave us an assumption, "Assuming the declining-balance depreciation rate is double the straight-line rate"
<u>So Working with this Assumption the Calculations are as follows</u>
Straight Line Rate = 1/4×100 = 25%
Therefore Declining Balance Rate = 2×25%=50%
First Year depreciation is = Depreciable Amount ×Diminishing Rate
=($39,700-$2,200) ×50%
= $18,750
Second Year depreciation is = Carrying Amount × Diminishing Rate
=(($39,700-$2,200) - $18,750)×50%
= $ 9,375
Terms:
(1) Depreciable Amount is Cost less Salvage Value
(2)Carrying Amount is Cost less Accumulated depreciation to date
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