A building acquired at the beginning of the year at a cost of $86,800 has an estimated residual value of $5,200 and an estimated useful life of four years. Determine the following.

Question

(a) The double-declining-balance rate fill in the blank 1 of 2
%
(b) The double-declining-balance depreciation for the first year fill in the blank 2 of 2$

Answer 1

To calculate the double-declining-balance depreciation, you can follow these steps:

(a) Calculate the double-declining-balance rate

1. Determine the straight-line depreciation rate: \[ \text{Straight-line rate} = \frac{100%}{\text{Useful Life}} \] Here, the useful life is 4 years. \[ \text{Straight-line rate} = \frac{100%}{4} = 25% \]

2. Calculate the double-declining-balance rate: \[ \text{Double-declining-balance rate} = 2 \times \text{Straight-line rate} \] \[ \text{Double-declining-balance rate} = 2 \times 25% = 50% \]

So, the answer for (a) is 50%.

(b) Calculate the double-declining-balance depreciation for the first year

1. Apply the double-declining-balance method:
   • The cost of the building is $86,800.
   • The double-declining-balance depreciation for the first year is calculated as follows: \[ \text{First Year Depreciation} = \text{Cost} \times \text{Double-declining-balance rate} \] \[ \text{First Year Depreciation} = 86,800 \times 50% = 43,400 \]

So, the answer for (b) is $43,400.

Final Answers:

(a) 50% (b) $43,400