Question

On October 1, 2018, Joe Company purchased a truck for $24,000 with a salvage value of $1,500 after its 5 years useful life. The company uses the double declining balance depreciation method. Prepare the depreciation schedule of the truck over its useful life and specify the amounts of:

DDB Rate

Depreciation Expense of the year 2018

Accumulated depreciation of the year 2019

Book Value at the beginning of the year 2020

Accumulated depreciation of the year 2023

Book Value at the end of the year 2023

The depreciation expenses over the years are: *

Constant

Variable

Declining ?

Answer 1

DDB rate = 1/useful life x 2 x 100

calculation of depreciation schedule using DDB method :

year	book value in the beginning of the year	DDB rate or depreciation %	depreciation expenses	accumulated depreciation	book value at the end of the year
2018	$24000	10% = 1/5 x 2 x 100 x 3/12	$2400	$2400	$21600
2019	$21600	40% = 1/5 x 2 x100	$8640	$11040	$12960
2020	$12960	40% = 1/5 x 2 x100	$5184	$16224	$7776
2021	$7776	40% = 1/5 x 2 x100	$3110.40	$19334.40	$4665.60
2022	$4665.60	40% = 1/5 x 2 x100	$1866.24	$21200.64	$2799.36
2023	$2799.36	30% = 1/5 x 2 x 100 x 9/12	$839.808	$22040.448	$1959.552

Depreciation Expense of the year 2018 = $2400

Accumulated depreciation of the year 2019 = $11040

Book Value at the beginning of the year 2020 = $12960

Accumulated depreciation of the year 2023 = $22040.448

Book Value at the end of the year 2023 = $1959.552

Double-declining balance is a type of accelerated depreciation method. This method records higher amounts of depreciation during the early years of an asset’s life and lower amounts during the asset’s later years. Thus, in the early years, revenues and assets will be reduced more due to the higher depreciation expense. In later years, a lower depreciation expense can have a minimal impact on revenues and assets. so depreciation expenses over the years are variable declining.

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