Answer:
A.
Depreciation expense for the first year: $6,820
Depreciation expense for the second year: $6,820
B.
Depreciation expense for the first year: $13,640
Depreciation expense for the second year: $8,184
Explanation:
A. The company uses straight-line depreciation method, Depreciation Expense each year is calculated by following formula:
Annual Depreciation Expense = (Cost of delivery van − Salvage Value )/Useful Life = ($37,000 - $2,900)/5 = $6,820
Depreciation expense for the first year: $6,820
Depreciation expense for the second year: $6,820
B. The company uses Double-declining- balance method
Under the straight-line method, useful life is 5 years, so the asset's annual depreciation will be 20% of the Depreciable cost.
Depreciable cost = Total asset cost - salvage value = $37,000 - $2,900 = $34,100
Under the double-declining-balance method the 20% straight line rate is doubled to 40% - multiplied times the Depreciable cost's book value at the beginning of the year.
Depreciation expense for the first year = $34,100 x 40% = $13,640
At the beginning of second year, the Depreciable cost's book value is $34,100-$13,640 = $20,460
Depreciation expense for the second year = $20,460 x 40% = $8,184
