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On January 1, 2017, Flowers Unlimited purchased a new delivery van. The van cost $35,000 with an estimated life of 5 years and $5,000 residual value. Double diminishing-balance depreciation will be used.
-What is the balance in the Accumulated Depreciation account at the end of 2018?
A) $22,400
B) $19,200
C) $12,600
D) $10,800

Question

Quizplus · Accepted Answer

Double declining-balance depreciation is twice the straight-line depreciation rate. The straight-line depreciation rate is (cost - residual value) / life = (35,000 - 5,000) / 5 = 6,000 / 5 = 1,200 per year. The double declining-balance depreciation rate is 2 * 1,200 = 2,400 per year. The depreciation expense for 2017 is 2,400 * 35,000 = 84,000. The book value at the end of 2017 is 35,000 - 84,000 = 26,600. The depreciation expense for 2018 is 2,400 * 26,600 = 63,840. The book value at the end of 2018 is 26,600 - 63,840 = 12,760. The balance in the Accumulated Depreciation account at the end of 2018 is 84,000 + 63,840 = 147,840.

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