(Learning Objective 3: Compute depreciation using double-declining-balance methodwith a residual value of zero) Using the double-declining-balance method of depreciation,calculate the following amounts for the car for each of the four years of its expected life:a. Depreciation expenseb. Accumulated depreciation balancec. Book valueThe following data should be used for S7-10 through S7-12.FlavorRite purchased a used van for use in its business on January 1, 2017. It paid $17,000for the van. FlavorRite expects the van to have a useful life of four years, with an estimatedresidual value of $1,400. FlavorRite expects to drive the van 16,000 miles during 2017, 19,000miles during 2018, 17,000 miles in 2019, and 48,000 miles in 2020, for total expected miles of100,000.
Depreciation Methods
The word "depreciation" is defined as an accounting method wherein the cost of tangible assets is spread over its useful life and it usually denotes how much of the assets value has been used up. The depreciation is usually considered as an operating expense. The main reason behind depreciation includes wear and tear of the assets, obsolescence etc.
Depreciation Accounting
In terms of accounting, with the passage of time the value of a fixed asset (like machinery, plants, furniture etc.) goes down over a specific period of time is known as depreciation. Now, the question comes in your mind, why the value of the fixed asset reduces over time.
(Learning Objective 3: Compute
with a residual value of zero) Using the double-declining-balance method of depreciation,
calculate the following amounts for the car for each of the four years of its expected life:
a. Depreciation expense
b.
c. Book value
The following data should be used for S7-10 through S7-12.
FlavorRite purchased a used van for use in its business on January 1, 2017. It paid $17,000
for the van. FlavorRite expects the van to have a useful life of four years, with an estimated
residual value of $1,400. FlavorRite expects to drive the van 16,000 miles during 2017, 19,000
miles during 2018, 17,000 miles in 2019, and 48,000 miles in 2020, for total expected miles of
100,000.
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