Question

Dog Days, Inc purchased a new vehicle for $40,000. If they life of the vehicle is 5 years and they use double declining balance depreciation with a salvage value of $3,000 what is the depreciation expense in year 2?

Answer 1

Answer:

Depreciation expense in year 2 =$9600

Working notes for the above answer is as under

Depreciation as per double declining balance method

=2 x straight line rate

=2 x (100/5)

=2 x20%

=40%

Now we will make the calculation table for DDB Depreciation rate as under

Year	Beginning balance	Dep. Rate	Depreciation	Accumulated Depreciation	Beginning balance
	A	B	C=A*B
1	40,000	40%	16000	16000	24,000
2	24,000	40%	9600	25600	14,400
3	14,400	40%	5760	31360	8,640
4	8,640	40%	3456	34816	5,184
5	5,184	40%	2,184	37000	3000