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Cambridge Company purchased a truck on January 1, 2018
Cambridge Company purchased a truck on January 1, 2018. Cambridge paid $20,000 for the truck. The truck is expected to have a $3,000 residual value and a 5-year life. Cambridge has a December 31 fiscal year end. Using the double-declining balance method, how much is the 2019 depreciation expense? (Enter only whole dollar values.) Hint: what is the year 2 depreciation amount?
Expert Solution
Computation of the depreciation expense for 2019:-
Straight line depreciation rate = 1 / Useful life
= 1 / 5
= 20%
Double declining depreciation rate = Straight line depreciation rate * 2
= 20% * 2
= 40%
Depreciation expense for 2018 = Cost * Double declining depreciation rate
= $20,000 * 40%
= $8,000
Depreciation expense for 2019 = (Cost - Depreciation expense for 2018) * Double declining depreciation rate
= ($20,000 - $8,000) * 40%
= $12,000 * 40%
= $4,800
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