Prepare a depreciation table using double decline balance method with the following details provided by ABC company.

Finance ManagementAccountingAcademic Content

Cost of the equipment = Rs. 10,00,000
Salvage value = Rs. 75,000
Useful life = 8 years

Solution

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

YearCost of the equipment at the start of the year (Rs)Depreciation rate (%)Amount depreciated RsBook value at the end of the year (Rs)
1100000025250000750000
275000025187500562500
356250025140625421875
442187525105468.75316406.25
5316406.252579101.5625237304.6875
6237304.68752559326.171875177978.51563
7177978.515632544494.6289075133483.88672

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

       = Rs.761047.363283/-

raja
Published on 13-Aug-2020 11:06:45
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