Pentec Ltd has just acquired five new computers for $29 000 in total,and paid a further $1000 to have additional zip drives added.The computers are expected to have a useful life of 5 years and their salvage value is expected to be $3000.Pentec Ltd has decided to apply the declining balance method of calculating depreciation.What is the first 2 years depreciation charge on the computers?

Question

Quizplus · Accepted Answer

The declining balance method involves applying a constant rate of depreciation to the diminishing book value of an asset each year. The total cost of the computers and the additional zip drives is $30,000 ($29,000 + $1,000). The salvage value is $3,000, leaving a depreciable base of $27,000. Without the specific rate provided, we can't calculate the exact depreciation charges, but option D's figures suggest a reasonable pattern of declining balance depreciation, where the first year's depreciation is higher than the second year's, reflecting the method's characteristic of larger depreciation charges in the earlier years.

Pentec Ltd Has Just Acquired Five New Computers for $29