Question

Tidy Limited purchased a new van on January 1, 2018. The van cost $28,000. It has an estimated life of ten years and the estimated residual value is $3,000. Tidy uses the double-declining-balance method to compute depreciation.

What is the adjusted balance in the Accumulated Depreciation account at the end of 2019?

• $8,960.

• $1,120

• $10,080.

• $2,800

Answer 1

Cost of Van = $28,000

Estimated useful life = 10 years

Double declining depreciation rate = 2 x 1/useful life

= 2 x 1/10

=20%

Depreciation expense for year 2018 = Cost of van x Double declining depreciation rate

= 28,000 x 20%

=$5,600

Book Value of van at the end of year 2018 = Cost of Van - Depreciation expense for year 2018

= 28,000 - 5,600

= $22,400

Depreciation expense for year 2019 = Book Value of van at the end of year 2018 x Double declining depreciation rate

= 22,400 x 20%

=$4,480

Adjusted balance in accumulated depreciation at the end of 2019 = Depreciation expense for year 2018 + Depreciation expense for year 2019

= 5,600+4,480

=$10,080

Third option is correct.

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