Cost of an asset is $1,000,000 and its residual value is $100,000. Estimated useful life of the asset is four years. Calculate depreciation for the first year using the double-declining-balance method of depreciation.

Question

Quizplus · Accepted Answer

The double-declining-balance method calculates depreciation by doubling the straight-line rate. The straight-line rate is 1/4 (25%) since the useful life is 4 years. Double that rate is 50%. The first year's depreciation is 50% of $1,000,000, which is $500,000.

Cost of an Asset Is $1,000,000 and Its Residual Value