Tidy Limited purchased a new van on January 1,2018.The van cost $20,000.It has an estimated life of five years and the estimated residual value is $5,000.Tidy uses the double-declining-balance method to compute depreciation. What is the depreciation expense for 2018?
A)$4,000
B)$3,000
C)$6,000
D)$8,000

Question

Quizplus · Accepted Answer

Depreciation expense = Book value × (2 ÷ Useful life)
Depreciation expense = (Cost − Accumulated depreciation)× (2 ÷ Useful life)
= ($20,000 − $0)× 2 / 5 = $8,000
Book value at end of 2018 = Cost − Accumulated depreciation
= $20,000 − $8,000 = $12,000
The book value at end of 2018 is greater than the residual value of $5,000.As such,the amount calculated is the amount of depreciation that can be taken.

Tidy Limited Purchased a New Van on January 1,2018