C is corrent. Salvage value is ignored when using a DB approach. The formula for 150% DB depreciation is 150% of the straight-line rate multiplied by the beginning-of-the-year book value. Since the straight-line rate is 20% (100%/5 years), the DB rate is 30% (150% × 20%). The book value for the first year is $500,000 (original cost). Therefore, year 1 depreciation is $150,000 ($500,000 cost × 30%). The book value for the second year is $350,000 ($500,000 original cost – $150,000 accumulated depreciation). Therefore, year 2 depreciation is $105,000 ($350,000 × 30%). The total accumulated depreciation at 12/31/Y2 is $255,000 ($150,000 + $105,000).
A is incorrect.Salvage value is ignored when using a DB approach. The formula for 150% DB depreciation is 150% of the straight-line rate multiplied by the beginning-of-the-year book value. Since the straight-line rate is 20% (100%/5 years), the DB rate is 30% (150% × 20%). The book value for the first year is $500,000 (original cost). Therefore, year 1 depreciation is $150,000 ($500,000 cost × 30%). The book value for the second year is $350,000 ($500,000 original cost – $150,000 accumulated depreciation). Therefore, year 2 depreciation is $105,000 ($350,000 × 30%). The total accumulated depreciation at 12/31/Y2 is $255,000 ($150,000 + $105,000).
B is incorrect. Salvage value is ignored when using a DB approach. The formula for 150% DB depreciation is 150% of the straight-line rate multiplied by the beginning-of-the-year book value. Since the straight-line rate is 20% (100%/5 years), the DB rate is 30% (150% × 20%). The book value for the first year is $500,000 (original cost). Therefore, year 1 depreciation is $150,000 ($500,000 cost × 30%). The book value for the second year is $350,000 ($500,000 original cost – $150,000 accumulated depreciation). Therefore, year 2 depreciation is $105,000 ($350,000 × 30%). The total accumulated depreciation at 12/31/Y2 is $255,000 ($150,000 + $105,000).
D is incorrect. Salvage value is ignored when using a DB approach. The formula for 150% DB depreciation is 150% of the straight-line rate multiplied by the beginning-of-the-year book value. Since the straight-line rate is 20% (100%/5 years), the DB rate is 30% (150% × 20%). The book value for the first year is $500,000 (original cost). Therefore, year 1 depreciation is $150,000 ($500,000 cost × 30%). The book value for the second year is $350,000 ($500,000 original cost – $150,000 accumulated depreciation). Therefore, year 2 depreciation is $105,000 ($350,000 × 30%). The total accumulated depreciation at 12/31/Y2 is $255,000 ($150,000 + $105,000).
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