An asset is estimated to have a total life of 8 years. Its acquisition cost is 16,000 and a salvage value of 4,000. The firm follows the double declining method of depreciation. In the second year, the rate of depreciation for the firm's asset is closest to ________.
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A. B. C. D.A
In DDM depreciation, depreciation expense = (2/n)*book value. Thus, depreciation rate = 2/n = 2/8 = 25%. Remember that in the later years, DDM has to switch to a different depreciation method to avoid depreciating below the salvage value.