A Company bought a used delivery truck for $20,000 with an estimated useful life of 4...
A Company bought a used delivery truck for $20,000 with an estimated useful life of 4 years. The company’s accountant estimated that the truck’s residual value would be $2,000 at the end of its useful life. Compute depreciation expense for the third year of the asset’s life using the double-declining balance method.
Homework Answers
Annual depreciation as per straight line=100%/4=25%/year
Hence depreciation as per double decline=2*Annual depreciation as per straight line*Beginning value of each period
| Year | Beginning value | Depreciation | Ending value |
| 1 | 20,000 | (2*25%*20,000)=10,000 | (20,000-10000)=$10,000 |
| 2 | 10,000 | (2*25%*10,000)=5000 | (10,000-5000)=$5000 |
| 3 | 5000 | (2*25%*5000)=$2500 |
Hence depreciation expense for third year=$2500
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