Bookkeeping 34. Dep

Question 1

1. p. 84. Under which depreciation method is the residual value ignored until the end?

Answer 1

DOUBLE DECLINING BALANCE METHOD (the 0THER Accelerated Method of depreciation).

Question 2

2. Under the DOUBLE DECLINING BALANCE METHOD, the percentage of depreciation taken each year is based on:

Answer 2

the STRAIGHT LINE RATE multiplied by TWO.

Question 3

3. Under the DOUBLE DECLINING BALANCE method, what is the amount depreciated the first year for an asset expected to last 4 years?

Answer 3

STRAIGHT LINE DEPRECIATION would be 25% per year, multiplied by two gives 50% of the asset value. That amount is deducted in the first year, and the remaining value of the asset is multiplied by 50% to determine the second year’s depreciation, and so on.

Question 4

4. Example of DOUBLE DECLINING BALANCE METHOD for an asset with a DEPRECIABLE COST of 25k, expected to last 4 years:

Answer 4

year undepreciated depre of
value at beginning 50% bal
remaining
1. 25,000 12,500
2. 12,500 6,250
3. 6,250 3,125
4. 3,125 1,563

Question 5

5, In the DOUBLE DECLINING BALANCE METHOD, there is an amount remaining at the end of the last year, what is done with it?

Answer 5

The final value is ADJUSTED so that the final BOOK VALUE equals the RESIDUAL (SALVAGE) value that was estimated at the outset.

Question 6

6. In the foregoing example, the TOTAL DEPRECIATION TAKEN comes to $23, 438, leaving $1,562, which is considered:

Answer 6

the RESIDUAL VALUE.