Dorchester Company purchased a new van for floral deliveries on July 1, 2014. The van cost $20,000 with an estimated life of 5 years and $5,000 residual value at the end of its useful life. The double diminishing-balance method of depreciation will be used.
-What is the balance of the accumulated depreciation account at the end of 2015?
A) $4,800
B) $6,400
C) $10,400
D) $4,000

Question

Quizplus · Accepted Answer

The double diminishing-balance method calculates depreciation by doubling the straight-line rate. The straight-line rate is 1/5 = 20%, so the double rate is 40%. For 2014, depreciation is $20,000 * 40% * 1/2 = $4,000 (half-year). For 2015, depreciation is ($20,000 - $4,000) * 40% = $6,400. Accumulated depreciation at the end of 2015 is $4,000 + $6,400 = $10,400.

Dorchester Company Purchased a New Van for Floral Deliveries on July