Dorchester Company purchased a new van for floral deliveries on July 1, 2017. The van cost $20,000 with an estimated life of 5 years and $5,000 residual value at the end of its useful life. The double diminishing-balance method of depreciation will be used. What is the balance of the accumulated depreciation account at the end of 2018?

Question

Quizplus · Accepted Answer

The double diminishing-balance method calculates depreciation by doubling the straight-line rate. The straight-line rate is 1/5 = 20%, so double is 40%. For 2017, depreciation is $20,000 * 40% * 1/2 year = $4,000. For 2018, depreciation is ($20,000 - $4,000) * 40% = $6,400. Total accumulated depreciation by end of 2018 is $4,000 + $6,400 = $10,400.

Dorchester Company Purchased a New Van for Floral Deliveries on July