Question

g On January 1, our company purchased a truck for $95,000. The estimated useful life of the truck is 5 years. The residual value at the end of 5 years is estimated to be $15,000. What is the depreciation expense for the second year of use if we use the double-declining balance method

Answer 1

Answer:

The depreciation expense for the second year is $22800

Explanation:

The double declining balance method is an accelerated form of allocating the depreciation expense to the asset. This method charges a high depreciation expense in the initial years of the estimated useful life of the asset and lower depreciation in the later years.

The formula to calculate the depreciation expense per year under this method is,

Depreciation expense = 2 * [ (Cost - Accumulated depreciation) / estimated useful life of the asset]

Double Declining Balance Method - Depreciation expense:

Year 1 = 2 * [ (95000 - 0) / 5]

Year 1 = $38000

Year 2 = 2 * [ (95000 - 38000) / 5]

Year 2 = $22800