A truck costs $35,000 with a residual value of $2,000. Its service life is five years. Using the declining-balance method at twice the straight-line rate, the book value at the end of 2 years is?
2 answers
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The declining-balance method is a method to calculate the depreciation of an item. For this problem, we are prompted to use this method at twice the straight-line rate.
We are presented with the following variables:1. Truck Cost = $35,0002. Residual Value = $2,0003. Service Life = 5 years.
We will be using the following formula:Year 1: (Truck Cost) ÷ (Service Life in years) = xx * 2 = Depreciation for Year 1
As the residual value is the value of the item after the service life, we will not be using this variable.$55,000 ÷ 5 = $7,000$7,000 * 2 = $14,000
$14,000.00 is the depreciation for Year 1.$35,000 - $14,000 = $21,000. At the end of the first year, the book value of the truck is $21,000.
For Year 2, we will apply the same formula to the book value of the truck by the end of Year 1.$21,000 ÷ 5 = ( $4,200 * 2) = $8,400 $21,000 - $8,400 = $12,600. At the end of the second year the book value is $12,600.
The correct answer is $12,600.
We are presented with the following variables:1. Truck Cost = $35,0002. Residual Value = $2,0003. Service Life = 5 years.
We will be using the following formula:Year 1: (Truck Cost) ÷ (Service Life in years) = xx * 2 = Depreciation for Year 1
As the residual value is the value of the item after the service life, we will not be using this variable.$55,000 ÷ 5 = $7,000$7,000 * 2 = $14,000
$14,000.00 is the depreciation for Year 1.$35,000 - $14,000 = $21,000. At the end of the first year, the book value of the truck is $21,000.
For Year 2, we will apply the same formula to the book value of the truck by the end of Year 1.$21,000 ÷ 5 = ( $4,200 * 2) = $8,400 $21,000 - $8,400 = $12,600. At the end of the second year the book value is $12,600.
The correct answer is $12,600.
1 answer