A fleet of refrigerated delivery trucks is acquired on January 5, 2017, at a cos

Question

A fleet of refrigerated delivery trucks is acquired on January 5, 2017, at a cost of $970,000 with an estimated useful life of 8 years and an estimated salvage value of $87,300. Compute the depreciation expense for the first three years using the double declining-balance method. (Round your answers to the nearest dollar.) Depreciation for the Period End of Period Beginning of Depreciation Depreciation Accumulated Expense Annual Period Period Book Rate (%) Depreciation Book Value Value First Year Second Year Third Year

Explanation / Answer

Depreciation under double declining balance method is double the straight line depreciation rate and is applied on the beginning book value of the asset

Straight line rate

= 1 / Useful life

= 1 / 8

= 0.125 or 12.5%

Double declining rate

= 2 x Straight line rate

= 2 x 12.5%

= 25%

The following table shows the calculations

Calculations A = Previous year E B C = A x B D = Sum of all C E = A - C Annual period Beginning of period book value Depreciation rate (%) Depreciation Expense Accumulated Depreciation Ending Book value First Year 970000 25.00% 242500 242500 727500 Second Year 727500 25.00% 181875 424375 545625 Third Year 545625 25.00% 136406 560781 409219

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