On January 1, Year 1 Missouri Company purchased a truck that cost $30,000. The truck had an expected useful life of 10 years and a $3,000 salvage value. Missouri uses the double declining-balance method. What is he amount of depreciation expense recognized in Year 2?
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.
Solution:
Cost of truck = $30,000
Expected salvage value = $3,000
Total useful life= 10 years
Depreciation rate - SLM = 1/10 = 10%
Depreciation rate- double declining = 10%*2 = 20%
Step by step
Solved in 2 steps
