Question

delivery truck at a cost of $31,000 on January 1, 2017. The truck is expected to have a salvage value of $4,000 at the end of its 4-year useful life. Assuming the declining-balance depreciation rate is double the straight-line rate, compute annual depreciation for the first and second years under the declining-balance method.

Answer 1

Answer:

Annual depreciation for the first year = $15,500

Annual depreciation for the second year = $7,500

Explanation:

Data provided in the question;

Cost of the delivery truck = $31,000

Salvage value = $4,000

Useful life = 4 years

Now,

The Rate of depreciation under declining-balance = 2 × straight-line rate

= 2 × $\frac{1}{4}$

= 0.5

or

= 0.5 × 100% = 50%

Therefore,

Annual depreciation for the first year = cost of truck × Rate of depreciation

= $31,000 × 0.5

= $15,500

Annual depreciation for the second year

= Book value at the end of first year of truck × Rate of depreciation

= $15,500 × 0.5

= $7,500