Question

On January 1, Year 1, Friedman Company purchased a truck that cost $50,000. The truck had an expected useful life of 8 years and an $9,000 salvage value. Friedman uses the double-declining-balance method. What is the book value of the truck at the end of Year 1? (Do not round intermediate calculations.) Multiple Choice

$28,500

$37,500

$39,750

$30,750

Answer 1

Cost of Acquisition of the asset		$   50,000.00
Salvage Value		$      9,000.00
Life of the asset		8 Years
Annual Depreciation Rate = 100%/8 years		12.5	%
Total depreciable amount for thelife of asset	50000-9000	$   41,000.00
Depreciation under double declining method = 50000*12.5%*2		$   12,500.00
Beginning Bookvalue		$   50,000.00
Depreciation expense		$ (12,500.00)
Ending book value		$   37,500.00