Question

On October 1, 20x1, Bergen Inc. purchased a car for $32446. Bergen decided to use the diminishing balance method to depreciate the car at the rate 32 %. The expected residual value for the car is $6064. What would be the amount charged for depreciation by Bergen for the year ended December 31, 20x2?

Answer 1

The Depriciation for 20x1:-

Depriciation at 31.12.20x1 = ($32446 * 32%) = $ 10,383

The Depriciation For 20x2:-

Depriciation at 31.12.20x2 = ($32446 - $10,383) * 32% = $7,060

Note:-

1.In the diminishing balance methode the depriciation expenses for each year is different and it is calculated on the basis Written dwon after the purchasing year of the machine.

2.Here we dont consider the depriciable means (cost - salvage value). only consider the purchase price of the machine for calculating depriciation expenses for 1 st year means the purchase year of the machine.