QS 10-6 (Algo) Double-declining-balance method LO P1 A building is acquired on January 1 at a cost of $1,010,000 with an estimated useful life of eight years and salvage value of $90,900. Compute depreciation expense for the first three years using the double-declining-balance method. Note: Round your answers to the nearest dollar. Annual Period First Year Second Year Third Year Depreciation for the Period Depreciation Rate (%) Beginning of Period Book Value $1,010,000 1808.000 646,400 Depreciation Expense 20% $ 20% 20% End of Period 161,600 129,280 Accumulated Depreciation 202,000 $ 202,000 $ 363,600 492,880 Book Value 808,000 646,400 517,120

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Depreciation Methods

The word "depreciation" is defined as an accounting method wherein the cost of tangible assets is spread over its useful life and it usually denotes how much of the assets value has been used up. The depreciation is usually considered as an operating expense. The main reason behind depreciation includes wear and tear of the assets, obsolescence etc.

Depreciation Accounting

In terms of accounting, with the passage of time the value of a fixed asset (like machinery, plants, furniture etc.) goes down over a specific period of time is known as depreciation. Now, the question comes in your mind, why the value of the fixed asset reduces over time.