An asset acquired January 1, 2018, for OMR 20,000 with an estimated 10-year life and no residual value. Using the double-declining balance method, depreciation for 2019 would be: Select one: A. 2,560 B. 3,200 C. 4,000 D. 2,048
Depreciation Methods
The word "depreciation" is defined as an accounting method wherein the cost of tangible assets is spread over its useful life and it usually denotes how much of the assets value has been used up. The depreciation is usually considered as an operating expense. The main reason behind depreciation includes wear and tear of the assets, obsolescence etc.
Depreciation Accounting
In terms of accounting, with the passage of time the value of a fixed asset (like machinery, plants, furniture etc.) goes down over a specific period of time is known as depreciation. Now, the question comes in your mind, why the value of the fixed asset reduces over time.
An asset acquired January 1, 2018, for OMR 20,000 with an estimated 10-year life and no residual value. Using the double-declining balance method,
Rate of depreciation under double declining balance method = (100%/Life) * 2 = (100%/10)*2 = 20%
Depreciation for 2018 = OMR 20,000 * 20% = OMR 4,000
Carrying amount of asset on Jan 1, 2019 = OMR 20,000 - OMR 4,000 = OMR 16,000
Depreciation for 2018 = OMR 16,000 * 20% = OMR 3,200
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