Depreciation is the method of allocating of cost of an tangible asset over its estimated life. It reduces the value of an asset on account of obsolescence, wear and tear. Double declining balance method of depreciation is an accelerated depreciation method. It computes annual depreciation by multiplying the asset’s decreasing book value by a constant percentage rate i.e. two times the straight line depreciation rate. The formula for double declining balance method of depreciation is - a n n u a l d e p r e c i a t i o n = ( cos t − a c c u m u l a t e d d e p r e c i a t i o n ) * 2 * ( 1 / u s e f u l l i f e ) Under straight line method of depreciation (SLM) depreciation remains the same in each year of assets. Depreciation under SLM can be computed with the help of formula shown below: s t r a i g h t l i n e d e p r e c i a t i o n = ( cos t − r e s i d u a l v a l u e ) / u s e f u l l i f e Company can exchange the old asset with the new assets. In this process company exchange the old assets and may pay some amount to compensate the value of new asset. Company may earn gain or loss from this exchange transaction To determine: We have to determine the journal entry for the transactions given in the question.

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Chapter 10, Problem P10A.41BPGB

To determine

Depreciation is the method of allocating of cost of an tangible asset over its estimated life. It reduces the value of an asset on account of obsolescence, wear and tear.

Double declining balance method of depreciation is an accelerated depreciation method. It computes annual depreciation by multiplying the asset’s decreasing book value by a constant percentage rate i.e. two times the straight line depreciation rate.

The formula for double declining balance method of depreciation is -

$a n n u a l d e p r e c i a t i o n = (\cos t - a c c u m u l a t e d d e p r e c i a t i o n) * 2 * (1 / u s e f u l l i f e)$

Under straight line method of depreciation (SLM) depreciation remains the same in each year of assets. Depreciation under SLM can be computed with the help of formula shown below:

$s t r a i g h t l i n e d e p r e c i a t i o n = (\cos t - r e s i d u a l v a l u e) / u s e f u l l i f e$

Company can exchange the old asset with the new assets. In this process company exchange the old assets and may pay some amount to compensate the value of new asset. Company may earn gain or loss from this exchange transaction

To determine:

We have to determine the journal entry for the transactions given in the question.

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