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Homework answers / question archive / Cambridge Company purchased a truck on January 1, 2018

Cambridge Company purchased a truck on January 1, 2018

Accounting

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?

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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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