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Happy inc.uses the double declining method of depreciation for its truck. The company purchased the truck for $17,200 and a $250 delivery fee. The company expects the truck to last 20 years and have a $2000 salvage value at that date. Calculate the following:
a. Double-declining-balance rate
b. Depreciation expense for year

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akiran007

Answer:

Straight line Rate = 5 %

Double-declining-balance rate= 10%

Double-declining- Depreciation for the year= $1745

Straight Line Depreciation for the year = $ 772.5

Explanation:

a. Double-declining-balance rate

The number of years of life gives us the rate of depreciation .

So life in years = 20

Straight line Rate = 100 %/20 = 5 %

Double-declining-balance rate= 2*  Straight line Rate

                                                         = 2* 5= 10%

b. Depreciation expense for year

Depreciation expense for year= Double-declining-balance rate* Beginning period book value

                   = 10 % * ( 17200 + 250) = 10 % * 17450= $1745

Straight Line Depreciation for the year = Cost - Salvage Value / Life in yrs

                                   = 17450 - 2000 / 20 = $ 772.5

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