Farr Corp. purchased a new delivery van on January 1, 2020 and chose to use the double declining balance depreciation method. The van cost $48,000 with an estimated life of five years and a $12,000 salvage value. After the year end adjustment, how much accumulated depreciation would be recorded on the van at December 31, 2021

$30,720

Explanation:

First, we will calculate the depreciation for 2020.

Depreciation for 2020 = ($48,000 cost - 0) × 40%

= $19,200

Depreciation for 2021 = ($48,000 cost - $19,200 depreciation 2020) × 40%

= $11,520

Accumulated depreciation at the end of 2021

= $11,520 + $19,200

= $30,720

The value of $30,720 will be recorded as accumulated depreciation on the value of the van at December 31, 2021.

• Note, the asset's annual depreciation will be 20% of the depreciation cost since its useful life is 5. It will however be 40% since we are using the double declining balance method.

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