The Charleston Company purchased a truck on January 1, 2010.The truck cost $36, 000 and was expected to have a residual value of $4, 000 at the end of 2017.Charleston uses the 150%-declining-balance depreciation method.What amount of depreciation should Charleston record on the truck in 2010?

Question

Quizplus · Accepted Answer

Using the 150%-declining-balance depreciation method, the depreciation rate is 1.5 times the straight-line rate. The straight-line rate is calculated as (cost - residual value) / useful life. In this case, the straight-line rate is (36,000 - 4,000) / 8 = 4,000 per year. 
Therefore, the depreciation rate for the first year is 1.5 x 4,000 / 12 = $500 per month. 
The depreciation expense for 2010 is then 12 x $500 = $6,000. So the correct answer is B.

The Charleston Company Purchased a Truck on January 1, 2010