A company purchased office equipment for 40000 and estimated

A company purchased office equipment for $40,000 and estimated a salvage value of $8,000 at the end of its 4-year useful life. The constant percentage to be applied against book value each year if the double-declining-balance method is used is 20% 25%. 50%. 5%.

Solution

Solution:

(1) answer is 50%

working:

Double declining balance method rate = 2 x straight line method rate

= 2 x ( 1 ÷ Life of assets ) x 100

= 2 x ( 1÷4)x100

= 50%

( 2) answer is $75,000

working:

Depreciation per unit of activity = (Cost - salvage value )÷ Total machine hours

=( $240,000 - $15,000 ) ÷ 15,000

= $15

Depreciation for 2nd year= $15 x 5,000

= $75,000