Answer:
$516,000
Step-by-step explanation:
Given:
- Beginning boo value of asset A = $750,000
- The salvage value of the asset B = $100,000
- The estimated life of asset t = 10 years
Find:
What is the book value in year 3?
Solution:
- Under the declining balance method, double declining method depreciation rate (R) is calculated by:
R = 1 / t
R = 1 / 10 = 10%
- The accumulated depreciation for 3 years is as follows:
Depreciation: ( A - B ) * R * 2
Year 1: DDB = ( 750,000 - 100,000 ) * 0.2 = $130,000
Year 2: DDB = ( 620,000 - 100,000)*0.2 = $104,000
- The book value in year 3 is:
$ 620,000 - $104,200 = $516,000
