Question

On October 1, 20x1, Bergen Inc. purchased a car for $33,285. Bergen decided to use the diminishing balance method to depreciate the car at the rate of 29%. The expected residual value for the car is $4,318. What would be the amount charged for depreciation by Bergen for the year ended December 31, 20x2 (round to the nearest whole dollar)?

Answer 1

To find the depreciation for Bergen Inc's car for the year ended December 31, 20x2, the diminishing balance method calculation reveals a depreciation expense of $7,217, rounded to the nearest whole dollar.

Step-by-step explanation:

To calculate the depreciation expense using the diminishing balance method for Bergen Inc's car for the year ended December 31, 20x2, we need to follow these steps:

• Determine the book value at the beginning of 20x2, which is after one year of depreciation.
• Calculate the depreciation for 20x2 based on the diminishing balance method.

First-year depreciation for year ended December 31, 20x1 would be:

$33,285 (cost) - $4,318 (residual value) = $28,967 (depreciable base)

$28,967 x 29% = $8,400.43

Round to the nearest whole dollar: $8,400.

Book value at beginning of 20x2:

$33,285 (initial cost) - $8,400 (depreciation for 20x1) = $24,885.

Depreciation for year ended December 31, 20x2:

$24,885 (book value at beginning of 20x2) x 29% = $7,216.65

Rounded to the nearest whole dollar, the depreciation expense for the year ended December 31, 20x2 is $7,217.