Double Declining Balance - Schweser 16B Example

On Pg 43 in section 16.B, there is a question about the effects of depreciation methods on net income.

I was able to do most of the question without any issues. However, I’m stuck on the double declining balance method for year 3 -5. Why does the depreciation expense drop from $132k to $49.3k in year 3 and stick with that for the next two years?

I was under the impression that depreciation in year 3 would be (2 x BV year 2) / Number of years. Wouldn’t this be (2 x 198k) / 5 = $79.2k depreciation in year 3? Is this a mistake in Schweser or am I totally missing something??

Thanks in advance!

-Mark

  1. did you know you could calculate this on your calculator too?

  2. provide details of the question - so you can be helped.

Sorry, I probably should have added initially. I forgot that Charterholders would also be around the forums and helping us out.

“Sackkett Laboratories purchases chemical processing machinery for $550,000. The equipment has an estimated useful life of five years and an estimated salvage value of $50,000.”

My question is regarding the depreciation over the five years for the double declining balance methodolgy. The answers I get are:

$220k, $132k, $79.2k, $47.5k, $21.3k, but the book shows $220k, $132k, $49.3k, $49.3k, $49.3k.

Thanks in advance for your help!

You’re totally missing something:

“(b) the double declinign balance method, _ changing to the straight-line method after two years _”

Ughhh totally missed this. Thank you!

There’s a lesson here:

Read the <blessed> question!

My pleasure.