[SPLIT, MOVED] calculate using double-declining balance

[teacherclw]

I am stuck on the following problem:

An tractor with an original cost of 214,000 has a trade in value of 7000 after 4 years. Ccalculate the depreciation for the second year, using the double declining balance method.

 

[tkhunny]

Have you looked it up? I typed "double declining balance depreciation" in a search engine and managed 110,000 hits. Here's how I read it.

(214000-7000)/4 = 51750

Total Depreciation: 214000 - 7000 = 207000

51750/(51400-7000) = 0.25 -- No surprise.

Double: 0.25*2 = 0.50

First Year:
Depreciation Charge: 50%(207000) = 103500 >= 51750
Value: 214000 - 103500 = 110500
Remaining to Depreciate: 110500 - 7000 = 103500

Second Year:
Depreciation Charge: 50%(103500) = 51750 >= 51750
Value: 110500 - 51750 = 58750
Remaining to Depreciate: 58750 - 7000 = 51750

Third Year:
Depreciation Charge: 50%(51750) = 25875 < 51750 Use 51750
Value: 58750 - 51750 = 7000
Remaining to Depreciate: 7000 - 7000 = 0

No Fourth Year. You're done.