Question

1) Cambridge Company purchased a truck on January 1, 2018. Cambridge paid $21,000 for the truck....

1) Cambridge Company purchased a truck on January 1, 2018. Cambridge paid $21,000 for the truck. The truck is expected to have a $3,000 residual value and a 5-year life. Cambridge has a December 31 fiscal year end. Using the double-declining balance method, how much is the 2019 depreciation expense? (Enter only whole dollar values.) Hint: what is the year 2 depreciation amount?

2) Cambridge Company purchased a truck on January 1, 2018. Cambridge paid $16,000 for the truck. The truck is expected to have a $3,000 residual value and a 7-year life. Cambridge has a December 31 fiscal year end. Using the straight-line method, how much is the 2019 depreciation expense? (Enter only whole dollar values.)

Homework Answers

Answer #1

1.Annual depreciation rate as per straight line method=100%/5

=20%/year

Hence depreciation as per double decline=2*Annual depreciation rate as per straight line method*Beginning value of each period

Year Beginning value Depreciation Ending value
2018 21000 (2*20%*21000)=8400 (21000-8400)=12600
2019 12600 (2*20%*12600)=$5040

Hence 2019 depreciation expense=$5040

2.Annual Depreciation=(Cost-Residual value)/Useful Life

=(16000-3000)/7

=$1857.14286/year

Hence 2019 depreciation expense=$1857(Approx)

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