Making the right choices with your money—managing your money—involves knowing how to:

• A. calculate depreciation using the double-declining balance method
• B. apply principles of personal accounting to budgeting and spending
• C. prepare consolidated financial statements for multinational corporations
• D. conduct forensic audits for legal proceedings

Answer: (B)

Verified step by step guidance

1. Understand the concept of depreciation: Depreciation is the allocation of the cost of a tangible asset over its useful life. The double-declining balance method is an accelerated depreciation method that applies a higher depreciation expense in the earlier years of an asset's life.
2. Identify the necessary inputs: To calculate depreciation using the double-declining balance method, you need the asset's initial cost, its useful life, and its salvage value (if any).
3. Determine the depreciation rate: The double-declining balance method uses a rate that is twice the straight-line depreciation rate. The straight-line rate is calculated as \( \text{Straight-line rate} = \frac{1}{\text{Useful life}} \). Multiply this rate by 2 to get the double-declining rate.
4. Calculate the annual depreciation expense: Multiply the book value of the asset at the beginning of the year by the double-declining rate. Note that the book value decreases each year as depreciation is applied.
5. Repeat the calculation for subsequent years: Continue applying the double-declining rate to the updated book value each year until the book value reaches the salvage value or the end of the useful life of the asset.