Farr Company purchased a new van for floral deliveries on January 1, 2018. The van cost $56,000 with an estimated life of 5 years and $14,000 salvage value at the end of its useful life. The double-declining-balance method of depreciation will be used. What is the balance of the Accumulated Depreciation account at the end of 2019?

Question

Quizplus · Accepted Answer

To calculate the annual depreciation using the double-declining-balance method, we first find the annual depreciation rate, which is 2/n, where n is the useful life in years. In this case, the annual depreciation rate is 40% (2/5).

In the first year, the depreciation expense is calculated as $56,000 x 40% = $22,400. The Accumulated Depreciation account is credited for the same amount, bringing the balance to $22,400.

In the second year, we use the same annual depreciation rate of 40%, but we apply it to the remaining book value, which is $33,600 ($56,000 - $22,400). The depreciation expense for the second year is $33,600 x 40% = $13,440. Adding this to the previous year's balance of Accumulated Depreciation, we get $35,840, which is the balance of Accumulated Depreciation at the end of 2019.

Farr Company Purchased a New Van for Floral Deliveries on January