Question

Corales Company acquires a delivery truck at a cost of $65,000. The truck is expected to have a salvage value of $2,000 at the end of its 5-year useful life. Assuming the declining-balance depreciation rate is double the straight-line rate, compute annual depreciation for the first and second years under the declining-balance method.

Answer 1

Answer :

Straight line depreciation rate = 1/5 = 20%

Declining balance depreciation = 20% + 20% = 40%

1st year Depreciation = Truck cost * 40%

                                = $65,000 * 40%

                                = $65,000 * 0.40

1st year Depreciation = $ 26,000

2nd year Depreciation : $ 65,000 - $26000 = $39,000

   = $39,000 * 0.40

2nd year Depreciation = $15,600