An asset was purchased on January 1, 2012 at a cost of $50,000 . It has a residual value of $10,000 and it has a life of 5 years. Its fourth year of depreciation expense under the double-declining-balance method will be:

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Under the double-declining-balance method, the depreciation rate is double the straight-line rate. The straight-line rate is 1/5 = 20%, so the double rate is 40%. The depreciation for each year is calculated on the book value at the beginning of the year. By the fourth year, the book value is low enough that the depreciation expense calculated would be $800, ensuring it does not go below the residual value.

An Asset Was Purchased on January 1, 2012 at a Cost