+- Accountancy Forum (https://www.accountancy.com.pk/forum)
+-- Forum: The Profession (https://www.accountancy.com.pk/forum/forumdisplay.php?fid=4)
+--- Forum: Accounting and Audit (https://www.accountancy.com.pk/forum/forumdisplay.php?fid=7)
+--- Thread: beginner's financial accounting question (/showthread.php?tid=6774)
beginner's financial accounting question - tophermike - 10-24-2009
Sorry if this is in the wrong place... I'm brand new here.
I am a student in Financial Accounting and ran across a question I was having trouble answering about double-declining-balance depreciation.
Can the asset be depreciated down to it's residual value before the useful life is reached?
Our textbook gave us the following scenario An asset has a 6 year life and a total value of $74,700. The salvage value is $14,700. Show the depreciation each year using the DDB method. By my calculations, after 4 years, the book value is $14,756 and thus only $56 can be depreciated in year 5 and zero dollars in year 6. Is this acceptable or are there certain times like this when you cannot use DDB?
Thank you for any help you have. I could not find any examples like this online; everything just showed the final amount depreciated in the final year of use. Our book has had a ridiculous amount of typos thus far, so I just want to make sure the question is appropriate.
- wsafca - 10-24-2009
http//beginnersinvest.about.com/od/incomestatementanalysis/a/double-declining-balance-depreciation-method.htm
I don't feel this method of depreciation is in accordance with IAS 16.
An entity should choose the depreciation method that systematically allocates the cost of the asset over its useful life.
Regards
Ahmed
- danishayub_76 - 10-26-2009
Yea... I agree with it. Anyhow can you give me the name of book, i will guide you in this regard.
Dawnish
- jamesparker - 11-02-2009
Hi
I do not feel the method of depreciation and any entry should choose the depreciation.
- danishayub_76 - 11-04-2009
Dear.
Under straight Line method the yearly depreciation will be.Rs.10,000 (74700-14700=60,000 / 6 years)
and the other way is that
74700/6=12450/- depreciate each year 12450 and at the end it will be Rs.14700 (salvage value).
Please keep in mind that double declining method gives a percentage, and there is no percentage of depreciation is given in this questino.
regards,
Dawnish