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    The declining-balance-method of depreciation

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    You are asked to make a depreciation schedule for a business asset. A depreciation schedule shows the remaining value of the asset at the end of each time period.

    Scenario D: Consider a system of notebook computers for a college math laboratory. The set of computers costs $10,000 and will be salvaged for $2,000 at the end of a 3-year period. Prepare a depreciation schedule using a 150%-declining balance rate for the system. The depreciation schedule should include the following information for each year: the year's depreciation, the accumulated depreciation, and the year's end-of-book value.

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    Solution Preview

    The declining-balance-method utilizes a depreciation rate (expressed as a percentage) that is a multiple of the straight-line method. In utilizing this method, the declining-balance rate remains constant and is applied to the reducing book value each year. Unlike other methods, with the declining balance method the salvage value is not deducted when considering the depreciation base. The declining-balance rate is multiplied by the book value of the asset at the beginning of each period. ...

    Solution Summary

    The declining-balance-method utilizes a depreciation rate (expressed as a percentage) that is a multiple of the straight-line method. In utilizing this method, the declining-balance rate remains constant and is applied to the reducing book value each year. Unlike other methods, with the declining balance method the salvage value is not deducted when considering the depreciation base.

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