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Chapter 9: 8RQ (page 488)

Which depreciation method ignores residual value until the last year of depreciation? Why?

Short Answer

Expert verified

The method of depreciation which ignores residual value is the double-declining method.

Step by step solution

01

Double-declining method

The method of depreciation which ignores the residual value until the last year of the depreciation is a double-declining method. It is a type of accelerated depreciation method.

02

Reason why double-declining ignores the residual value

The double-declining method is a method of depreciation in which more of the assets’ cost allocated near the start of an asset’s life and less at the end of its useful life.

The residual value is ignored until the depreciation expense takes the book value below the residual value. When this occurs, the final year depreciation is calculated as the amount needed to bring the asset to its residual value.

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