Schager company purchased a computer system on january 1, 2019, at a cash cost of $25,000. the estimated useful life is 10 years, and the estimated residual value is $3,000. the company will use the double declining-balance depreciation method. what is the accumulated depreciation balance as of december 31, 2020?

The accumulated depreciation balance is = $ 9000.

Explanation:

1. Determining the depreciation rate%.

Total depreciation amount =  Asset acquisition cost -  Residual value

Total depreciation amount =  25,000 - 3,000 = $ 22,000.

Depreciation rate % = depreciation per year / Total depreciation over useful life × 100.

Depreciation per year = Total depreciation over useful life / No. of years.

Depreciation per year = 22,000/10 = 2,200.

Depreciation rate % = 2,200/ 22,000 × 100 = 10%

But since the company uses double depreciation then depreciation rate % =10% × 2 = 20% .

Determining the depreciation amount for the 31  December 2020

Depreciation amount by 31  December 2020 = depreciation amount for the 31  December 2019 + depreciation amount for the 31  December 2020

Determining depreciation amount for the 31  December 2019.

Depreciation amount for the 31 December 2019 = Depreciation rate × Acquisition value of Asset.

Depreciation amount for the 31 December 2019 = 20% × 25,000

Depreciation amount for the 31 December 2019 = $ 5,000.

Determining depreciation amount for the 31  December 2020.

Depreciation amount for the 31 December 2020 = Depreciation rate × (Acquisition value of Asset - Depreciation amount for the 31 December 2019).

Depreciation amount for the 31 December 2020 = 20% × ( 25,000 - 5,000)

Depreciation amount for the 31 December 2020 = $ 4,000.

Determining the accumulated depreciation balance as of December 31, 2020.

The accumulated depreciation balance as of 2020 = Depreciation amount for the 31 December 2019 + Depreciation amount for the 31 December 2020.

The accumulated depreciation balance as of 2020 = 5,000 + 4,000

The accumulated depreciation balance as of 2020 = $ 9,000.

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