CFA Level 1: Depreciation Calculation Example

Depreciation Calculation Example

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Question

An organization purchased a computer on January 1, 1996 for $108,000. It was estimated to have a 4- year useful life and a salvage value of $18,000. The double-declining-balance method is to be used. The amount of depreciation to be reported for the year ending December 31, 1996 is ________.

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A. B. C. D. E.

B

When using a declining-balance method, a constant rate is applied to the changing carrying value of the asset. The constant rate for the double-declining-balance method is twice the straight-line rate ((100% / 4 years) X 2)