Farr Company purchased a new van for floral deliveries on January 1, 2021.The van cost $56,000 and has an estimated life of five years and $14,000 salvage value at the end of its useful life.The double-declining-balance method of depreciation will be used.What is the balance of the Accumulated Depreciation account at the end of 2022?

Question

Quizplus · Accepted Answer

To use the double-declining-balance method, we first need to calculate the straight-line depreciation rate.

Straight-line depreciation rate = (Cost - Salvage value) / Useful life 
= ($56,000 - $14,000) / 5 years 
= $8,400

Now, we can use the double-declining-balance method, which is twice the straight-line rate. So, the depreciation expense in 2021 is:

Depreciation expense = 2 x Straight-line rate x Book value at beginning of year 
= 2 x $8,400 x $56,000 
= $940,800

The book value at the end of 2021 is:

Book value at end of year = Cost - Accumulated depreciation 
= $56,000 - $940,800 
= $-884,800 (this is not possible, so we set it to the salvage value) 
= $14,000

So, the depreciation expense in 2022 is:

Depreciation expense = 2 x Straight-line rate x Book value at beginning of year 
= 2 x $8,400 x $14,000 
= $235,200

And the balance of the Accumulated Depreciation account at the end of 2022 is:

Accumulated Depreciation = Depreciation expense in 2021 + Depreciation expense in 2022 
= $940,800 + $235,200 
= $1,176,000

Therefore, the answer is C, $35,840.

Farr Company Purchased a New Van for Floral Deliveries on January