00:01
The declining balance method for depreciation involves applying a fixed rate to the book value of the asset at the beginning of each period.
00:07
The formula for the declining balance method is the depreciation for the year is equal to the book value at the beginning of the year times the depreciation rate.
00:15
The depreciation rate is typically twice the straight line rate for a useful life of 10 years.
00:20
So given that the asset has a salvage value of 6 .633 % of the first cost at the end of its life, the depreciation rate could be calculated as 2 divided by its useful life, which is 10, which is 0 .2 or 20%.
00:36
And if we calculate the book value at the beginning of the sixth year, the book value sixth year would be the value at the end of the sixth year divided by 1 minus the rate to the fifth.
00:58
And so this calculates to 539 ,373 .78.
01:24
Now that we have this, we can find the first cost using the salvage value and the remaining useful life.
01:31
The first cost is going to be the book value after the sixth year plus the salvage cost over 1 minus r to the n...