# A fleet of refrigerated delivery trucks is acquired on January 5, 2017, at a cost of $880,000... ## Question: A fleet of refrigerated delivery trucks is acquired on January 5, 2017, at a cost of$880,000 with an estimated useful life of 10 years and an estimated salvage value of $79,200. Compute the depreciation expense for the first three years using the double-declining-balance method. Depreciation for the Period End of Period Annual Period Beginning of Period Book Value Depreciation Rate (%) Depreciation Expense Accumulated Depreciation Book Value First Year Second Year Third Year ## Depreciation Expense: Depreciation expense is recorded to expense the cost of an asset over its estimated useful life. Under the double-declining-balance depreciation method, the rate used is calculated by doubling the straight-line depreciation rate. ## Answer and Explanation: Using the double-declining-balance depreciation method, depreciation expense for each period is computed by using twice the straight-line depreciation rate. The asset's estimated salvage value is not factored into the calculation, but the ending book value for each period cannot surpass the salvage value. Based on the information provided, the depreciation expense for the first three years using the double-declining-balance method would be as follows: Depreciation for the Period End of Period Annual Period Beginning of Period Book Value Depreciation Rate (%) Depreciation Expense Accumulated Depreciation Book Value First Year$880,000 (A1) 20% (B) $176,000 (C1)$176,000 (D1) $704,000 (E1) Second Year$704,000 (A2) 20% (B) $140,800 (C2)$316,800 (D2) $563,200 (E2) Third Year$563,200 (A3) 20% (B) $112,640 (C3)$429,440 (D3) $450,560 (E3) The amounts in the table above are computed as follows: A1 = provided in question =$880,000

B = Double-declining-balance depreciation rate = Straight-line rate * 2 = 100% / 10 years * 2 = 20%

C1 = $880,000 * 20% =$176,000

D1 = C1 = $176,000 E1 =$880,000 - $176,000 =$704,000

A2 = E1 = $704,000 C2 =$704,000 * 20% = $140,800 D2 =$176,000 + $140,800 =$316,800

E2 = $880,000 -$316,800 = $563,200 A3 = E2 =$563,200

C3 = $563,200 * 20% =$112,640

D3 = $316,800 +$112,640 = $429,440 E3 =$880,000 - $429,440 =$450,560 