Sutton Fabricators purchased 50 executive desks for $3,500. Delivery costs totaled $98 and handling costs were $59. The salvage value is $375 after 5 years. Using the double-declining-balance method, calculate the book value at the end of year 2. (Round the declining-balance rate to 4 decimal places, and all dollar amounts to the nearest cent)

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Quizplus · Accepted Answer

The initial cost is $3,657 ($3,500 + $98 + $59). The double-declining rate is 2/5 = 0.4. Year 1 depreciation is $3,657 * 0.4 = $1,462.80. Year 2 depreciation is ($3,657 - $1,462.80) * 0.4 = $877.68. Book value at end of year 2 is $3,657 - $1,462.80 - $877.68 = $1,316.52.

Sutton Fabricators Purchased 50 Executive Desks for $3,500