A company purchased office equipment for $41000 and estimated a salvage value of $8200 at the end of its 5-year useful life. The constant percentage to be applied against book value each year if the double-declining-balance method is used is:

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valetta valetta · Answer 1 · 2019-11-22T07:54:27+01:00

Answer:

The constant percentage to be applied against book value each year is 40%

Explanation:

Data provided in the question:

Cost of the equipment purchased by the company = $41,000

Estimated a salvage value = $8200

Useful life = 5 years

Now,

Under the double-declining-balance method,

the percentage rate of depreciation is given as;

= [tex]2\times\frac{\textup{1}}{\textup{Useful life}}\100\%[/tex]

thus,

for Useful life of 5 years, we have

the percentage rate of depreciation = [tex]2\times\frac{\textup{1}}{\textup{5}}\100\%[/tex]

or

the percentage rate of depreciation = 0.4 × 100%

or

the percentage rate of depreciation = 40%

Hence,

The constant percentage to be applied against book value each year is 40%