Wilkens Corporation acquired a delivery truck on January 4,2010.The total cost of the truck was $138,000.Wilkens estimated that the truck would be used for 10 years before being sold for an estimated $28,500.Wilkens uses the double-declining balance method of depreciation.The carrying value of the truck on January 2,2014 will be:

Question

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The double-declining balance method of depreciation involves doubling the straight-line rate of depreciation. First, calculate the straight-line depreciation rate: 100% / 10 years = 10% per year. Double this rate for the double-declining balance method, which gives 20% per year. The initial cost of the truck is $138,000. For each year, apply the 20% depreciation rate to the book value at the beginning of the year (not the original cost).Year 1 depreciation: $138,000 * 20% = $27,600. New book value: $138,000 - $27,600 = $110,400.Year 2 depreciation: $110,400 * 20% = $22,080. New book value: $110,400 - $22,080 = $88,320.Year 3 depreciation: $88,320 * 20% = $17,664. New book value: $88,320 - $17,664 = $70,656.Year 4 depreciation: $70,656 * 20% = $14,131.20. New book value: $70,656 - $14,131.20 = $56,524.80.Rounding to the nearest dollar, the carrying value on January 2, 2014, is approximately $56,525.

Wilkens Corporation Acquired a Delivery Truck on January 4,2010