Oxford Enterprises acquired a delivery truck on January 4,2010.The total cost of the truck was $87,000.Oxford estimated that the truck would be used for 5 years before being sold for an estimated $16,500.Oxford uses the double-declining balance method of depreciation.The depreciation expense for the year ended December 31,2012 was:

Question

Quizplus · Accepted Answer

The double-declining balance method of depreciation involves doubling the straight-line rate of depreciation. The straight-line depreciation rate for a 5-year life is 20% (100% / 5 years). Therefore, the double-declining balance rate is 40% (20% * 2). For the first year, the depreciation expense is 40% of $87,000, which is $34,800. This reduces the book value to $52,200 ($87,000 - $34,800) for the start of the second year. The second year's depreciation is 40% of $52,200, which is $20,880, reducing the book value to $31,320 ($52,200 - $20,880). For the third year, the depreciation expense is 40% of $31,320, which is $12,528.

Oxford Enterprises Acquired a Delivery Truck on January 4,2010