Ch8. Video 11 - Declining-Balance Method example

The video tutorial explains the double declining balance method of depreciation, a variation of the declining balance method. It outlines the steps to calculate depreciation, emphasizing the importance of understanding the straight line rate and its multiplication by a factor of two. The tutorial provides a detailed walkthrough of calculating depreciation for each year, highlighting the significance of the book value and accumulated depreciation. It also discusses the concept of depreciable base and necessary adjustments to ensure the depreciation does not exceed the allowable amount. The tutorial concludes with final notes on the method's application.

What is the primary difference between the double declining method and the straight line method?

• The straight line method is more complex.

• The double declining method uses a variable factor.

• The straight line method is faster.

• The double declining method considers salvage value.

How do you calculate the straight line rate in the double declining method?

• Subtract salvage value from the useful life.

• Add the useful life to the salvage value.

• Multiply the useful life by two.

• Divide one by the useful life.

What is the double declining rate if the straight line rate is 0.2?

• 0.6

• 0.2

• 0.1

• 0.4

In Year 1, what is the depreciation expense if the book value is $16,000 and the rate is 0.4?

• $2,304

• $3,840

• $6,400

• $1,760

Why is it important to track accumulated depreciation?

• To calculate the salvage value.

• To adjust the book value.

• To ensure the depreciable base is not exceeded.

• To determine the useful life.

What adjustment is made in Year 3 to avoid exceeding the depreciable base?

• Subtract excess from depreciation expense.

• Increase the depreciation rate.

• Decrease the book value.

• Add excess to accumulated depreciation.

What happens to the depreciation expense in Year 4 and Year 5?

• It remains the same.

• It increases.

• It decreases slightly.

• It becomes zero.