Eastman Company purchased a delivery truck for $35,000 on January 1, 2008. The truck was
assigned an estimated useful life of 5 years and has a residual value of $10,000. Compute
depreciation expense using the double-declining-balance method for the years 2008 and 2009
BE 3

The depreciation expense of the truck in 2008 and 2009 are $14,000 and $8,400 respectively.

Step-by-step explanation:

The double declining depreciation method depreciates assets twice as fast as the traditional declining balance method.

The method records larger depreciation expenses during the earlier years of an asset’s useful life, and smaller ones in later years.

As a result, companies opt for the method for assets that are likely to lose most of their value early on, or which will become obsolete faster.

For double declining depreciation method,

- Divide “100%” by the number of years in the asset’s useful life, this is the straight-line depreciation rate.

- Then, multiply that number by 2 and that is the Double-Declining Depreciation Rate. - In this method, depreciation continues until the asset value declines to its salvage value.

Number of useful lives = 5 years.

- Divide 100% by 5 years

100% / 5 = 20%

- Then, multiply that percentage by 2

20% x 2 = 40%

The Double-Declining Depreciation rate is 40%.

Value of the truck at the start of 2008 = $35,000

Depreciation in 2008 = 40% × 35000 = $14,000

Book Value of the truck at the start of 2009 = $35000 - $14000 = $21000

Depreciation in 2009 = 40% × 21000 = $8,400

Hope this Helps!!!

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