A truck costs $35,000 with a residual value of $2,000. Its service life is five years. Using the declining-balance method at twice the straight-line rate, the book value at the end of year 2 is:
A)$35,000
B)$22,000
C)$12,600
D)$33,000
E)None of these

Question

Quizplus · Accepted Answer

Using the declining-balance method at twice the straight-line rate means that the annual depreciation rate is 40% (2 times the straight-line rate of 20%).

Year 1 depreciation: 
= $35,000 x 40% = $14,000

Book value at the end of year 1: 
= $35,000 - $14,000 = $21,000

Year 2 depreciation: 
= $21,000 x 40% = $8,400

Book value at the end of year 2: 
= $21,000 - $8,400 = $12,600

Therefore, the correct answer is (C).

A Truck Costs $35,000 with a Residual Value of $2,000