A vehicle costing $30,000 has a useful life of 4 years and a salvage value of $3,000. What is the annual depreciation using the declining balance method at 25%?
Practice Questions
1 question
Q1
A vehicle costing $30,000 has a useful life of 4 years and a salvage value of $3,000. What is the annual depreciation using the declining balance method at 25%?
$7,500
$6,750
$8,250
$9,000
Depreciation Expense = Book Value at Beginning of Year x Depreciation Rate. Year 1: $30,000 x 25% = $7,500. Year 2: ($30,000 - $7,500) x 25% = $5,625.
Questions & Step-by-step Solutions
1 item
Q
Q: A vehicle costing $30,000 has a useful life of 4 years and a salvage value of $3,000. What is the annual depreciation using the declining balance method at 25%?
Solution: Depreciation Expense = Book Value at Beginning of Year x Depreciation Rate. Year 1: $30,000 x 25% = $7,500. Year 2: ($30,000 - $7,500) x 25% = $5,625.
Steps: 5
Step 1: Identify the initial cost of the vehicle, which is $30,000.
Step 2: Determine the depreciation rate, which is 25%.
Step 3: Calculate the depreciation expense for Year 1 by multiplying the initial cost by the depreciation rate: $30,000 x 25% = $7,500.
Step 4: Subtract the Year 1 depreciation from the initial cost to find the book value at the beginning of Year 2: $30,000 - $7,500 = $22,500.
Step 5: Calculate the depreciation expense for Year 2 by multiplying the book value at the beginning of Year 2 by the depreciation rate: $22,500 x 25% = $5,625.
