Chapter 9, Problem 8RQ

To determine

Double-declining-balance method: It is an accelerated method of depreciation under which the depreciation declines in each successive year until the value of asset becomes zero. Under this method, the book value (original cost less accumulated depreciation) of the long-term asset is decreased by a fixed rate. It is double the rate of the straight-line depreciation. Use the following formula to determine the annual depreciation:

$\text{Annual depreciation }=\text{ Purchase price }\times \left(\frac{2}{\text{Useful life}}\right)$

To identify: which depreciation method ignores residual value until the last year of depreciation.

To determine

To explain: the reason for ignoring the residual value until the last year of depreciation.