- CFA Exams
- CFA Level I Exam
- Topic 4. Financial Statement Analysis
- Learning Module 7. Analysis of Long-Term Assets
- Subject 6. Depreciation Methods

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**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.

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**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... |