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10 June, 06:20

Corales Company acquires a delivery truck at a cost of $58,000. The truck is expected to have a salvage value of $6,000 at the end of its 5-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.

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  1. 10 June, 08:12
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    The annual depreciation for the first and second years under the declining-balance method is $29,000 and $14,500 respectively

    Explanation:

    In the declining balance method, the depreciation rate is double of the straight line method.

    So, the depreciation rate = (100 : useful life) * double

    = (100 : 5) * 2

    = 50%

    The annual depreciation for the first year = Acquire price * depreciation rate

    = $58,000 * 50%

    = $29,000

    And, the annual depreciation for the second year = Year 1 annual depreciation * depreciation rate

    = $29,000 * 50%

    = $14,500
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