On January 1, Year 1, Friedman Company purchased a truck that cost $43,000. The truck had an expected useful life of 8 years and an $8,000 salvage value. Friedman uses the double-declining-balance method. What is the book value of the truck at the end of Year 1?

Question

Quizplus · Accepted Answer

The double-declining-balance method involves doubling the straight-line depreciation rate. The straight-line rate is 1/8 = 12.5%, so the double rate is 25%. The first year's depreciation is 25% of $43,000, which is $10,750. Subtracting this from the initial cost gives a book value of $32,250 at the end of Year 1.

On January 1, Year 1, Friedman Company Purchased a Truck