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Prepare a depreciation table using double decline balance method with the following detailsnprovided by ABC company.
Cost of the equipment = Rs. 10,00,000 Salvage value = Rs. 75,000 Useful life = 8 years
The solution is given below −
Step 1 − Calculate depreciation rate using straight line method.
Depreciation rate using straight line method = 1/useful life => 1/8 => 12.5%
Step 2 − Multiple depreciation rate in step 1 with 2 to get accelerated depreciation rate Accelerated depreciation rate = 2*12.5% => 25%
Step 3 − Prepare depreciation table using double decline method
|Year||Cost of the equipment at the start of the year (Rs)||Depreciation rate (%)||Amount depreciated Rs||Book value at the end of the year (Rs)|
Book value at the end year 1 = cost of equipment at the start of year 2
Similarly, for rest of years
So cost of equipment at year 2 = (1000000 – 250000) = 750000 Cost of equipment at year 3 = (750000 – 187500) = 562500 Cost of equipment at year 4 = (562500 – 140625) = 421875 Cost of equipment at year 5 = (421875 – 105468.75) = 316406.25 Cost of equipment at year 6 = (316406.25 – 79101.5625) = 237304.6875 Cost of equipment at year 7 = (237304.6875 – 59326.171875) = 177978.51563
Accumulated depreciation = 250000+187500+140625+79101.5625+59326.171875+44494.6289075
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