**Understanding the Double Declining Balance Depreciation Calculation**The double declining balance method is a form of accelerated depreciation used in accounting. This method reduces the book value of an asset at a faster rate in the earlier years of its service life. It contrasts with other methods that allocate depreciation more uniformly.**Options Explained:**- **Option 1:** "Long-term assets that lack physical substance, and whose existence is often based on a legal contract." - This refers to intangible assets, which is unrelated to double declining balance depreciation.- **Option 2:** "An accelerated method that allocates a higher amount of depreciation expense in the earlier years of the asset's life and lower depreciation in later years." - **This is the correct definition.** The double declining balance method initially charges more depreciation, decreasing the expense over time.- **Option 3:** "Allocating an equal amount of depreciation expense to each year of the asset’s service life." - This describes the straight-line method, not the double declining balance method.- **Option 4:** "The amount the company expects to receive from selling the assets at the end of its service life." - This refers to salvage value, not a depreciation method.The double declining balance method provides a way to reflect the higher utility or performance of an asset in its early years. This can be beneficial for tax and accounting purposes, allowing for greater initial tax deductions.

Double Declining balance method of depreciation: This is one of the methods to calculate the…

What is the double declining balance depreciation calculation? O Long-term assets that lack physical substance, and whose existence is often based on a legal contract. O An accelerated method that allocates a higher amount of depreciation expense in the earlier years of the asset's life and lower depreciation in later years O Allocating an equal amount of depreciation expense to each year of the assets service life. O The amount the company expects to receive from selling the assets at the end of its service life.

What is the double declining balance depreciation calculation? O Long-term assets that lack physical substance, and whose existence is often based on a legal contract. O An accelerated method that allocates a higher amount of depreciation expense in the earlier years of the asset's life and lower depreciation in later years O Allocating an equal amount of depreciation expense to each year of the assets service life. O The amount the company expects to receive from selling the assets at the end of its service life.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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If an item is capitalized why do you think different depreciation methods are allowed? Does the depreciation method chosen impact Net Income in the short term? What about over the life of the asset? Assume you have an asset with original cost of $150,000 and accumulated depreciation of $30,000 when you spend $10,000 on the asset. If the $10,000 is an ordinary repair what is the Book Value Before and the Book Value after the $10,000 expenditure? If the $10.000 expenditure is an Extraordinary Repair (extends the life of the asset) and is recorded as a debit to Accumulated Depreciation and a credit to Cash What is the Book Value Before and the Book Value after the $10,000 expenditure? if the expenditure is a Betterment (improves the function of the asset) and is recorded as a debit to the asset and a credit to Cash. What is the Book Value Before and the Book Value after the $10,000 expenditure?
Depreciation is the reduction in the usable value of fixed assets due to normal wear and tear of time. Depreciation is an indirect non – cash expenditure which is provided on SLM or WDV basis. Rahul is new junior accountant with Hard Work Mills Private Limited he wants to understand normal depreciation differs from additional depreciation. As a tax adviser, guide him on the two concepts and discus the cases where additional depreciation is not allowed
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(Multiple Choice Question) The reason why the amortization on a natural resource is not expensed at the end of each year is because: 1. Natural resources often increase in value 2. Natural resources have an indefinite life span 3. The market value of the natural resource can increase or decrease depending on the situation 4. The resource that is extracted is expected to be sold
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Show the solution in good accounting form
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