Question

On January 1, 20X1 NCAA Company purchased a truck that cost $24,000. The truck had an expected useful life of 5 years and a $4,000 salvage value. The amount of depreciation expense recognized in 20X3 assuming that NCAA uses the double declining balance method is:

Answer 1

Given:
Cost = 24,000
life = 5 years
salvage value = 4,000

Double declining balance stops when the book value of the asset is equal to its salvage value.

Double declining balance formula: 2 * straight line dep. rate * book value beginning of the year.

straight line dep rate = (24,000 - 4,000) ÷ 5 yrs = 4,000
⇒ 4,000 / 20,000 = 0.2 or 20%

year Net book value, beg DDB dep. ext net book value, end
2011 24,000 9,600 14,400
2012 14,400 5,760 8,640
2013 8,640 3,456 5,184

The depreciation expense recognized in 20x3 is 3,456.