A new truck costing $50,000 with a residual value of $4,000 has an estimated useful life of five years. Using the declining-balance method at twice the straight-line rate, the depreciation expense in year 2 is:
A)$20,000
B)$12,000
C)$18,000
D)$7,200
E)None of these

Question

Quizplus · Accepted Answer

The straight-line rate is 1/5 or 20%. The double declining rate is 40%. Year 1 depreciation: $50,000 * 40% = $20,000. Year 2 depreciation: ($50,000 - $20,000) * 40% = $12,000.

A New Truck Costing $50,000 with a Residual Value of $4,000