Using DDB:
|
Yr. 1 |
Yr. 2 |
| Revenue |
15,000 |
15,000 |
| Depreciation |
4,000 |
1,333 |
| Taxable Income |
11,000 |
13,667 |
| Taxes Payable |
3,300 |
4,100 |
An asset with a 3-year life would have a straight line depreciation rate of 0.3333 per year. Using DDB the depreciation rate is twice this amount or 0.66667. $2,000 is the amount of depreciation left on the equipment in year 2 ($6,000 − $4,000). Therefore, the amount of depreciation in the 2nd year is (0.66667)(2,000) = $1,333
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