Question

Deuce Company purchased a truck for $50,000 on January 2, 2018. The asset has an expected salvage value of $5,000 at the end of its five-year useful life. How much is the depreciation expense in 2022 if double-declining balance depreciation is used for 2018-2019 and there is a switch to straight-line in year 2020?

Answer 1

Answer:

Depreciation for 2022 = $5,160

Explanation:

Provided details,

Cost of the asset = $50,000

Salvage value = $5,000

Double Declining depreciation rate = $\frac{Straight\ line\ depreciation}{Cost\ of\ asset} \times 200$

Straight line depreciation = $\frac{50,000 - 5,000}{5} = 9,000$

Double declining depreciation = $\frac{9,000}{50,000} \times 200 = 36$

Rate of double declining depreciation = 36%

Depreciation in year 2018 = $50,000 $\times$ 36% = $18,000

Book value at year end = $50,000 - $18,000 = $32,000

Depreciation for 2019 = $32,000 $\times$ 36% = $11,520

Book value at end of 2019 = $32,000 - $11,520 = $20,480

After this straight line method is followed.

Depreciation for each year will be = $\frac{20,480 - 5,000}{3} = \frac{15,480}{3} = 5,160$

Depreciation for 2020 = $5,160

Depreciation for 2021 = $5,160

Depreciation for 2022 = $5,160

As for each year from 2020 there is straight line depreciation which means it is fixed for the amount.

Final Answer

Depreciation for 2022 = $5,160