Final answer:
Using the double declining balance method, after adding the purchase price to shipping costs and subtracting the trade-in value, the accumulated depreciation of the cargo van at the end of year 2 is $59,507, rounded to the nearest cent.
Step-by-step explanation:
To calculate the depreciation schedule using the double declining balance method for a cargo van that cost $70,800 with additional shipping costs of $1,557 and a trade-in value of $5,412, we must first determine the depreciable base of the van. The depreciable base is the purchase price plus any additional costs minus the salvage value (trade-in value). The double declining balance rate is 2/(useful life of the asset), which in this case is 2/3, as the useful life is 3 years.
To start the calculation, add the purchase price and shipping costs to get the initial cost of the van: $70,800 + $1,557 = $72,357. The depreciable base is the initial cost minus the trade-in value: $72,357 - $5,412 = $66,945.
Now, to calculate the depreciation for the first year, multiply the depreciable base by the double declining balance rate, which is (2/3). After the first year's depreciation is subtracted from the depreciable base, we repeat the process for the second year.
Year 1:Depreciation Expense = $66,945 * (2/3) = $44,630 (rounded to the nearest cent)
Accumulated Depreciation = $44,630
Year 2:Depreciation Expense = ($66,945 - $44,630) * (2/3) = $14,877 (rounded to the nearest cent)
Accumulated Depreciation = $44,630 + $14,877 = $59,507 (rounded to the nearest cent)
The accumulated depreciation at the end of year 2 is $59,507, when rounded to the nearest cent.