- CFA Exams
- CFA Level I Exam
- Topic 4. Financial Statement Analysis
- Learning Module 7. Analysis of Long-Term Assets
- Subject 6. Depreciation Methods
CFA Practice Question
The annual depreciation expense, using the double-declining-balance method, is equal to ______.
B. the straight-line rate times twice the book value
C. twice the straight-line rate times the net book value
A. twice the straight-line rate times the difference between original cost and salvage value
B. the straight-line rate times twice the book value
C. twice the straight-line rate times the net book value
Correct Answer: C
Double-declining-balance depreciation is computed by multiplying twice the straight-line rate by the asset's net book value.
User Contributed Comments 8
| User | Comment |
|---|---|
| kalps | Twice being 2/N X (cost - acc depn) (NB salvage value is not subtracted) - wehere as it is in Straight line depn |
| shasha | you may put it in this way: rate for straight line is "1/N", rate for DDB is "2/N". |
| liana | Can somebody please explain to me why this answer is not wrong ? Thank u |
| thekobe | liana, net book value doesnt consider the salvage value |
| johntan1979 | Straight line rate = 1/N Where N = Estimated Useful Life DDB = 2 x 1/N x Net book value |
| Shaan23 | Liana. Exactly my point on this question. Dont use calculator shortcuts. Just do the example in the text and you'll know this section inside out. |
| davidt876 | Dont be a dick Shaan23 |
| chesschh | feeling like I dont have an excuse for only reading the notes... |