An income producing asset costing $120,000 is being depreciated using the 150% Declining Balance method with a salvage value of $20,000, determine the depreciation in year 3 assuming the equipment will be depreciated over a life of 5 years.

Question

Quizplus · Accepted Answer

The 150% Declining Balance method is a form of accelerated depreciation that results in a higher depreciation expense in the early years of an asset's life. The depreciation rate for the 150% Declining Balance method is 150% divided by the asset's useful life. In this case, the asset's useful life is 5 years, so the depreciation rate is 150% / 5 = 30%.The depreciation expense for year 3 is calculated as follows:Depreciation expense = (Depreciation rate * Book value) - Salvage valueDepreciation expense = (30% * $67,500) - $20,000Depreciation expense = $17,640Therefore, the depreciation expense for year 3 is $17,640.

An Income Producing Asset Costing $120,000 Is Being Depreciated Using