[malthermia]

Equipment is purchased for $80,000. It has an 8 year useful life and $39000 residual value. Under the doubl-declining-balance method, what is the depreciation expense for year 3?

a. 6,000
b. 48,000
c. 11,250
d. 8,436

I keep coming up with 11250, but the book says the answer is 6,000. The DDB rate I come up with is 25%.


Thanks

[pready]

To figure out the answer for this you need
to figure out the Depereciation for year 1 which is $80,000 X 25% = $20,000

Year 2 is 80,000 - 20,000 = $60,000 X 25% = $15,000

Year 3 is $60,000 - 15,000 = $45,000 X 25% = $11,250 However $45,000 - 11,250 is Less than the Salvage Value of the Equipment which is $39,000. You can only use the Depreciation Expense down to the Salvage Value. So the Depreciation Expense for year 3 is $6,000 which is $45,000 - 39,000.

For years 4 through 8 there will be no Depreciation Expense.