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    tbagano's Avatar
    tbagano Posts: 2, Reputation: 1
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    #1

    Apr 4, 2010, 08:17 PM
    double declining method
    On January 7, 2006 company bougth a van costing $15,600 less trade-in at $5000, estimated life is 4 years, using the double declinig method I came with O book value and accumulated deprecition of $15,600 during the second year. The van was sold at $6500 at the beginning of the third year, January 9. I can't determine if there is a loss and does it continue to depreciate through the third year
    rehmanvohra's Avatar
    rehmanvohra Posts: 739, Reputation: 27
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    #2

    Apr 4, 2010, 11:36 PM

    DDM is twice the rate of SLM.
    SLM rate is 25%, hence DDM is 50%
    Cost 15,600
    Year 1 7,800
    Balance 7,800
    Year 2 3,900
    Balance 3,900
    Hence gain on disposal 6,500 - 3,900 = 2,600

    Your mistake was to calculate year 2 depreciation on cost instead of reduced balance as per DDM
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