To calculate the accumulated depreciation for Schager Company’s computer system as of December 31, 2020, using the double declining balance method, follow these steps: Given data:
- Cost of computer system = $25,000 (assuming from typical example since original amount is missing)
- Purchase date = January 1, 2019
- Useful life = 10 years
- Residual (salvage) value = $3,000
- Depreciation method = Double declining balance
Step 1: Calculate the straight-line depreciation rate
Straight-line rate = 1 / Useful life = 1 / 10 = 10% Double declining rate = 2 × 10% = 20%
Step 2: Calculate depreciation for each year
Year 1 (2019)
- Beginning book value = $25,000
- Depreciation = 20% × $25,000 = $5,000
- Ending book value = $25,000 - $5,000 = $20,000
Year 2 (2020)
- Beginning book value = $20,000
- Depreciation = 20% × $20,000 = $4,000
- Ending book value = $20,000 - $4,000 = $16,000
Step 3: Calculate accumulated depreciation as of December 31, 2020
Accumulated depreciation = Year 1 depreciation + Year 2 depreciation
= $5,000 + $4,000 = $9,000
Note on residual value
The book value after Year 2 is $16,000, which is above the residual value of $3,000, so no adjustment is needed yet.
Final answer:
The accumulated depreciation balance as of December 31, 2020, is $9,000 using the double declining balance method
