Fabian Woodworks This company purchased a truck at a cost of $12,000.The truck has an estimated residual value of $2,000 and an estimated life of 5 years,or 100,000 hours of operation.The truck was purchased on January 1,2012,and was used 27,000 hours in 2012 and 26,000 hours in 2013.
-Refer to Fabian Woodworks.If the company uses the double-declining-balance depreciation method,what amount is the depreciation expense for 2013?

Question

Quizplus · Accepted Answer

Double-declining-balance method is an accelerated depreciation method that results in higher depreciation expense in the early years of an asset's life. To calculate the depreciation expense for 2013, we need to first calculate the truck's book value at the beginning of the year (January 1, 2013):
Book value at beginning of 2013 = Cost - Accumulated depreciation
Accumulated depreciation at the end of 2012:
Depreciation expense in 2012 = (2/5) x ($12,000 - $2,000) = $4,800
Accumulated depreciation at the end of 2012 = $4,800
Book value at beginning of 2013 = $12,000 - $4,800 = $7,200
Depreciation expense in 2013:
Depreciation rate = 2 x (1/5) = 0.4
Depreciation expense in 2013 = Depreciation rate x Book value at beginning of 2013
= 0.4 x $7,200 = $2,880. 
Therefore, the correct answer is B) $2,880.

Fabian Woodworks This Company Purchased a Truck at a Cost