What is the depreciation deduction, using each of the following methods, for the

Question

What is the depreciation deduction, using each of the following methods, for the second year for an asset that costs $31,000 and has an estimated MV of $6,000 at the end of its six-year useful life? Assume its MACRS class life is also six years. (a) 200% DB, (b) GDS (MACRS), and (c) ADS (MACRS) Click the icon to view the summary of the principal features of GDS under MACRS Click the icon to view the GDS Recovery Rates (R). a. Using the 200% DB method the depreciation deduction for the second year is $ nearest dollar.) (Round to the

Explanation / Answer

Declining balance depreciation is calculated by following formula)

Depreciation = Depreciation rate * Book value of asset

Depreciation rate = Accelerator * straight line rate

Straight line rate = 1/ useful life of asset in years

If asset cost is 31000 and its useful life is 6 years then straight line rate will be = 1/6

= 0.17

After that we need to calculate Depreciation rate which will be = 0.17*2= 0.34

Depreciation for the first year will be,    

Depreciation 1st year = 0.34*31000

= 10540

Book value of asset after first year of depreciation will be = 31000- 10540= 20460

Next year depreciation will be calculated same way, we can now prepare the depreciation schedule

Year

Depreciation

Accumulated depreciation

Book value

1

10540

10540

20460

2

6956

17496

13504

Year 2 depreciation Expense is 6956.

Year

Depreciation

Accumulated depreciation

Book value

1

10540

10540

20460

2

6956

17496

13504

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