On January 1, Year 1, Friedman Company purchased a truck that cost $32,000. The truck had an expected useful life of 8 years and an $7,000 salvage value. Friedman uses the double-declining-balance method. What is the book value of the truck at the end of Year 1

Friedman Company

Book Value of the truck at the end of Year 1 = $24,000, determined as follows:

Book value = cost minus accumulated depreciation.

Book value = $32,000 - (double-declining-balance depreciation)

Therefore, book value at the end of the first year will be equal to $32,000 * 75% or $32,000 - $8,000 (25% of $32,000) = $24,000

Explanation:

The double-declining-balance method of depreciation is an accelerated depreciation method that expenses an asset's cost more rapidly than the straight-line depreciation method. The formula is to determine the useful life of the asset, divide 100 by this useful life, and then multiply this number by 2 and use it as a percentage to depreciate the asset on a reducing balance basis.

In Friedman Company, the useful life is 8 years or 12.5% (100/8) yearly.  Therefore, the depreciation rate will be 25% ( 2 * Straight-line percentage).

Note that initially the salvage value is not considered in calculating the depreciable amount.

two years ago, when picking flowers in the mountains back of yosemite valley, i found a book. it was blotted and storm-beaten; all of its outer pages were mealy and crumbly. the paper seemed to dissolve like the snow beneath which it had been buried, however; many of the inner pages were well preserved. and although all were more or less stained and torn, whole chapters were easily readable. this is the condition of the great open book of yosemite glaciers today; its granite pages have been torn and blurred by the same storms that wasted the castaway book.

two years ago, when picking flowers in the mountains back of yosemite valley; i found a book. it was blotted and storm-beaten, all of its outer pages were mealy and crumbly. the paper seemed to dissolve like the snow beneath which it had been buried, however, many of the inner pages were well preserved. and although all were more or less stained and torn; whole chapters were easily readable. this is the condition of the great open book of yosemite glaciers today, its granite pages have been torn and blurred by the same storms that wasted the castaway book.

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