On January 1,2017,Xit Company bought a new delivery truck for $30,000.Xit plans to use the truck for 4 years,after which it will be sold for $6,000.Depreciation expense for 2020,the fourth year of use,using double-declining-balance equals:

Question

Quizplus · Accepted Answer

Depreciation expense = Book value × (2 ÷ Useful life)
Depreciation expense = (Cost − Accumulated depreciation)× (2 ÷ Useful life)
2017:
= ($30,000 − $0)× 2 / 4 = $15,000
2018:
= ($30,000 − $15,000)× 2 / 4 = $7,500
Book value at end of 2018 = $30,000 − ($15,000 + $7,500)= $7,500
The book value at the end of 2018 is greater than the residual value of $5,000.As such,the amount calculated above is the amount of depreciation that can be taken.
2019:
= [$30,000 − ($15,000 + $7,500)] × 2 / 4 = $3,750
Book value at end of 2019 would be $3,750 [or $30,000 − ($15,000 + $7,500 + $3,750)],which is less than the residual value of $6,000.Recording the calculated amount of depreciation expense in 2019 would cause the book value to drop below the residual value.
Revised calculation:
Depreciation expense = Beginning book value of $7,500 (calculated above)− Residual value of $6,000 = $1,500
2020:
No depreciation will be taken since book value equals residual value.

On January 1,2017,Xit Company Bought a New Delivery Truck for $30,000.Xit