Question

On January 1, X-it Company bought a new delivery truck for $30,000. X-it plans to use the truck for 4 years, after which it will be sold for $6,000. Depreciation Expense for the 2nd year using double-declining-balance equals ______.

Answer 1

The depreciation expense for the 2nd year using double-declining-balance is $45,000.

Step-by-step explanation:

Depreciation expense for the 2nd year using double-declining-balance can be calculated as follows:

1. Calculate the annual depreciation by dividing the initial cost of the truck ($30,000) by the number of years it will be used (4 years). This gives us $7,500 as the annual depreciation.
2. To calculate the depreciation expense for the 2nd year, we take the double-declining-balance rate (which is 2 times the straight-line rate) and apply it to the net book value of the asset at the beginning of the 2nd year. The net book value at the beginning of the 2nd year is the initial cost ($30,000) minus the cumulative depreciation from the 1st year ($7,500). This gives us a net book value of $22,500.
3. Multiply the net book value by the double-declining-balance rate (2 times the straight-line rate) to get the depreciation expense for the 2nd year. In this case, assuming a double-declining-balance rate of 2, we multiply $22,500 by 2 to get a depreciation expense of $45,000.

Therefore, the depreciation expense for the 2nd year using double-declining-balance is $45,000.