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On January 1, 2011, Flowers Unlimited purchased a new delivery van. The van cost $35,000 with an estimated life of 5 years and $5,000 residual value. Double diminishing-balance depreciation will be used.
-What is the balance in the Accumulated Depreciation account at the end of 2012?
A)$22,400
B)$19,200
C)$12,600
D)$10,800

Question

Use the following information for questions 
On January 1, 2011, Flowers Unlimited purchased a new delivery van. The van cost $35,000 with an estimated life of 5 years and $5,000 residual value. Double diminishing-balance depreciation will be used.
-What is the balance in the Accumulated Depreciation account at the end of 2012?
A)$22,400
B)$19,200
C)$12,600
D)$10,800

Quizplus · Accepted Answer

Double diminishing-balance depreciation is twice the straight-line depreciation rate. The straight-line depreciation rate is (Cost - Residual Value) / Life = ($35,000 - $5,000) / 5 = $6,000 per year. The double diminishing-balance depreciation rate is 2 * $6,000 = $12,000 per year. The depreciation expense for 2011 is $12,000 and the depreciation expense for 2012 is $12,000 * (1 - 12,000 / 35,000) = $10,400. The balance in the Accumulated Depreciation account at the end of 2012 is $12,000 + $10,400 = $22,400.

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