On March 31, 2011, Wild Flowers purchases a delivery van for $30,000, which it e

Question

On March 31, 2011, Wild Flowers purchases a delivery van for $30,000, which it expects to use for 5 years, during which time it expects to drive the van about 100,000 miles. At the end of the 5 years it is expected that the van will be sold for $2,000. During 2011 the van was driven 12,000 miles, and in 2012 it was driven 25,000 miles. Assume Wild Flowers only prepares annual financial statements, and that their year-end is the calendar year-end (i.e. December 31).

Which one of the following statements is incorrect (false) with respect to the double declining balance method for recording depreciation and the above situation.

a. A theoretical justification for using the double declining balance method is that an asset may be more productive during the earlier years of its useful life and therefore more cost should be expensed as more revenue is generated.

b. In calculations, twice the straight-line rate is used.

c. Tax [MACRS] depreciation generally uses the double declining balance method.

d. In calculations, $28,000 would be used as the depreciable basis in 2011.

Explanation / Answer

Which one of the following statements is incorrect (false) with respect to the double declining balance method for recording depreciation and the above situation. d. In calculations, $28,000 would be used as the depreciable basis in 2011.

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