Question

Blossom Chemicals Company acquires a delivery truck at a cost of $35,000 on January 1, 2022. The truck is expected to have a salvage value of $3,500 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. First Year Second Year Annual depreciation under declining balance method $ 7875 $ 7875

Answer 1

Solution:

Double decling depreciation rate = (1/4) *2 = 50%

First year depreciation = $35000*50% = $17,500

Book value at the beginning of second year = $35000 - $17500 = $17,500

Second year depreciation = $17500*50% = $8,750