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Gordon Chemicals Company acquires a delivery truck at a cost of $31,000 on January 1, 2022. The truck is expected to have a salvage value of $4,000 at the end of its 4-year useful life. Assuming the declining-balance depreciation rate is double the straight-line rate, compute annual depreciation for the first and second years under the declining-balance method.
Year 1: 15.500
Year 2: ?

Answer :

Answer:

15,500 and 7,750

Explanation:

The annual depreciation for year 1 and year 2 under the declining-balance method is 15,500 and 7,750 respectively.


How do you compute the Annual depreciation rate under the declining-balance method?

[tex]\text{Rate}= (31,000-4000)\\=29,000 \\\text{Rate}=29,000/4\\=7,250\\\text{Rate}=7,250/29,000\\=0.25\\ \text{Rate}=0.25 \text{ x }2\\= 50 \text{percent or} 0.50\\\text{Year 1} = 31,000 \text{ x }0.50\\\text{Year 1} =$15,500\\\text{Year 2} = (31,000 - $15,500)*0.50\\\text{Year 2} =$ 7,750[/tex]

For more information about the depreciation method, refer below

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