Declining Balance MethodSolution Depreciation rate 152 40

Declining Balance Method

Solution

Depreciation rate = 1/5*2 = 40% Depreciation for year 1 = 6000*40% = 2400 Depreciation for year 2 =(6000-2400)*40% = 1440 Depreciation for year 3 =(6000-2400-1440)*40% = 864 Book value at the end of year 3 = 6000-2400-1440-864=1296 Depreciation for year 4 will be lesser of: Depreciation for year 4 = 1296-800 = 496 Depreciation for year 4 =(6000-2400-1440-864)*40% = 518 Depreciation for year 4 = 496 Book Value at the end of year 4 = 1296-496 = $800