An asset has a cost of $50,000 with a residual value of $10,000. it has a life of 5 years and was purchased on january 1. its fourth full year of depreciation expense under double-declining-balance will be

Hi there

The double declining balance method of depreciation, also known as the 200% declining balance method of depreciation, is a common form of accelerated depreciation. Accelerated depreciation means that an asset will be depreciated faster than would be the case under the straight line method. Under declining balance method the residual value is not subtracted from from the cost of 50000

Now let's start to solve the question

First find the depreciation rate

100/5=20% this is the depreciation rate of straight line method

So the depreciation rate under declining balance method is double of the rate of straight line method

So it's 40%

In the first year the depreciation

50,000*0.4=20,000

book value

50,000-20,000=30,00

In the second year the depreciation

30,000*0.4=12,000

book value

30,000-12,000=18,000

in the third year the depreciation

18,000*0.4=7,200

book value

18,000-7,200=10,800

in the fourth year the depreciation is

10,800*0.4=4,320.

its fourth full year of depreciation expense under double-declining-balance will be 4320