Question

On January 1, Year 1, Friedman Company purchased a truck that cost $48,000. The truck had an expected useful life of 8 years and an $8,000 salvage value. The book value of the truck at the end of Year 1, assuming that Friedman uses the double-declining-balance method, is:

Answer 1

The answer is $36,000

Step-by-step explanation:

First we need to determine the rate to be used.

To determine the rate:

100percent/8 years

12.5%

Double rate is 12.5% x 2

=25%. This is the rate to be used.

Cost of the truck is $48,000

First year depreciation is:

25% x $48,000

So first year depreciation is $12,000

Book value of the truck at the end of year 1 is $48,000 - $12,000

=$36,000