Pharoah Chemicals Company acquires a delivery truck at a cost of $35,000 on January 1, 2022. The truck is expected to have a salvage value of $2,900 at the end of its 5-year useful life. Assuming the declining-balance depreciation rate is double the straight-line rate, compute annual depreciation for the first and second years under the declining-balance method.

$14,000

Year 2 = $8400

Explanation:

Depreciation expense using the double declining method = Depreciation factor x cost of the asset

Depreciation factor = 2 x (1/useful life)

Depreciation expense in year 1 = 2/5 x $35,000 = $14,000

Book value at the beginning of year 2 = $35,000 - $14,000 = $21,000

Depreciation expense in year 2 = 2/5 x $21,000 = $8400

the answer is "b.the increased supply will create a surplus. "

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