Lesson 37; Module 12

What caution needs to be exercised when using a declining-balance depreciation method to compute depreciation expense during the final years of an asset's life?

cannot reduce book value below salvage value

What is true about the salve value in regard to declining-balance depreciation?

the salvage value is not completely ignored because the depreciation taken during the asset's life cannot reduce the asset's book value below the estimated salvage value

What is the equation for double-declining balance depreciation?

(straight line rate x 2) (cost - accumulated depreciation) = current year's depreciation expense

What is the equation for the double-declining balance rate?

1 / estimated life (years) x 2

What are 2 factors about declining-balance depreciation that differs from other depreciation methods?

1. the initial computation ignores the asset's salvage value 2. a constant depreciation rate is multiplied by a decreasing book value

What is double-declining balance depreciation?

an accelerated depreciation method in which an asset's book value is multiplied by a constant depreciation rate (such as double the straight-line percentage, in the case of double-declining balance)

What is the most common methods of the accelerated depreciation method called?

double-declining balance depreciation

What is accelerated depreciation methods?

methods of depreciation that reflect a rapid and early depreciation

What is true in regard to the declining balance depreciation method?

provides for higher depreciation charges the earlier years of an asset's life than does the straight-line method

What number is ignored in the computation of declining-balance depreciation in the first year of the asset's life?

salvage value