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Double-Declining-Balance Depreciation

Mediumdouble declining balance
A compactor costs $50,000 and has a 5-year life. Using double-declining-balance depreciation, the depreciation charge in year 2 is most nearly:
  1. A$8,000
  2. B$12,000
  3. C$10,000
  4. D$20,000
Show solution

Answer: B. $12,000

Equation: double-declining-balance rate d = 2/n; Dk = d × (book value at the start of year k). Values: first cost $50,000, n = 5, so d = 0.40. Step 1: D₁ = 0.40 × 50,000 = $20,000, leaving BV₁ = $30,000. Step 2: D₂ = 0.40 × 30,000 = $12,000. $20,000 is the year-1 charge; $10,000 is straight-line; $8,000 uses the straight-line rate 1/n in the declining-balance formula.
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