Question

Crane Pants Company acquires a delivery truck on April 6, 2021, at a cost of $42,000. The truck is expected to have a residual value of $6,800 at the end of its 4-year useful life. Assume that the company has a policy of recording a half-year’s depreciation in the year of acquisition and a half-year’s depreciation in the year of disposal.

Using the double diminishing-balance method, calculate the depreciation expense for each year of the equipment’s life.

a.)

Depreciation - 2021		$
Depreciation - 2022		$
Depreciation - 2023		$
Depreciation - 2024		$

Answer 1

· Working

A	Cost	$            42,000.00
B	Residual Value	$              6,800.00
C=A - B	Depreciable base	$            35,200.00
D	Life [in years]	4
E=C/D	Annual SLM depreciation	$              8,800.00
F=E/C	SLM Rate	25.00%
G=F x 2	DDB Rate	50.00%

· Calculation

Year	Beginning Book Value	Depreciation rate	Depreciation expense	Ending Book Value	Accumulated Depreciation
1	$              42,000.00	50.00%	$         15,750.00 [42000 x 50% x 9months/12]	$             26,250.00	$        15,750.00
2	$              26,250.00	50.00%	$         13,125.00	$             13,125.00	$        28,875.00
3	$              13,125.00		$            6,325.00	$                6,800.00	$        35,200.00
4	$ 6800.00		$            0.00	$                6,800.00	$        35,200.00

· Requirement

2021	$         15,750.00 [42000 x 50% x 9months/12]
2022	$         13,125.00
2023	$            6,325.00
2024	$            0.00