On January 1,Year 1,XYZ Company paid $60,000 cash to purchase a truck.The truck has a $5,000 salvage value and a 4-year useful life.XYZ uses the double-declining-balance method.How much depreciation expense would XYZ report on its Year 2 income statement?

Question

Quizplus · Accepted Answer

Double-declining-balance rate = (1 ÷ 4)× 2 = 50%
Year 1 depreciation expense = Book value at beginning of year of $60,000 × 50% = $30,000
Book value at end of Year 1 = Cost of $60,000 -Accumulated depreciation of $30,000 = $30,000
Year 2 depreciation expense = Book value at beginning of year of $30,000 × 50% = $15,000

On January 1,Year 1,XYZ Company Paid $60,000 Cash to Purchase