A plant asset cost P144,000 and is estimated to have an P18,000 salvage value at the end of its 8-year useful life. The annual depreciation expense recorded for the third year using the double-declining-balance method would be
Question
A plant asset cost P144,000 and is estimated to have an P18,000 salvage value at the end of its 8-year useful life. The annual depreciation expense recorded for the third year using the double-declining-balance method would be
Solution
To calculate the annual depreciation expense using the double-declining-balance method, follow these steps:
-
Determine the straight-line depreciation rate. This is done by dividing 1 by the useful life of the asset. In this case, 1 divided by 8 years equals 0.125 or 12.5%.
-
Double the straight-line rate. So, 12.5% times 2 equals 25%.
-
For the first year, apply the double-declining-balance rate to the cost of the asset. So, P144,000 times 25% equals P36,000. This is the depreciation expense for the first year.
-
For the second year, subtract the first year's depreciation from the cost of the asset, then multiply the result by the double-declining-balance rate. So, (P144,000 - P36,000) times 25% equals P27,000. This is the depreciation expense for the second year.
-
For the third year, subtract the accumulated depreciation from the cost of the asset, then multiply the result by the double-declining-balance rate. So, (P144,000 - P36,000 - P27,000) times 25% equals P20,250. This is the depreciation expense for the third year.
So, the annual depreciation expense recorded for the third year using the double-declining-balance method would be P20,250.
Similar Questions
A company purchased a plant asset for $60,000. The asset has an estimated salvage value of $4,000, and an estimated useful life of 7 years. The annual depreciation expense using the straight-line method is $4,000 per year.Group of answer choicesTrueFalse
A company purchased factory equipment for P250,000. It is estimated that the equipment will have a P25,000 salvage value at the end of its estimated 5-year useful life. If the company uses the double-declining-balance method of depreciation, the amount of annual depreciation recorded for the second year after purchase would be
A plant asset was purchased on January 1 for Sh 600,000 with an estimated salvage value of Sh 100,000 at the end of its useful life. The current year's Depreciation Expense is Sh 50,000 calculated on the straight-line basis and the balance of the Accumulated Depreciation account at the end of the year is Sh 250,000. The remaining useful life of the plant asset is __ years. Hint: Write your answer as an integer, e.g 1, 2, 3, etc. Answer:
A truck was purchased for P1,200,000 and it was estimated to have a P200,000 salvage value at the end of its useful life. Monthly depreciation expense of P20,000 was recorded using the straight-line method. The annual depreciation rate is.
An equipment was purchased on January 1, 2017 for P50, 000 with a salvage value of P5, 000 and useful life of 10 years. The company has a semi-annual accounting period. The amount of depreciation to be recorded on June 30, 2017 isSelect one:a.P4,500b.P2,250c.P2,500d.P5,000
Upgrade your grade with Knowee
Get personalized homework help. Review tough concepts in more detail, or go deeper into your topic by exploring other relevant questions.