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Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881

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Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881
Textbook Problem
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Declining Balance Depreciation

Refer to the information for Irons Delivery Inc. above. Irons uses the double-declining-balance method of depreciation.

Required:

Prepare the journal entry to record depreciation expense for 2019 and 2020.

To determine

The Cost of the fixed asset represents the capability of assistance an asset can give. Except for Land, other assets’ potential declines over the useful life as much as an asset is utilized in the operations of the company.

The declining balance depreciation method is a depreciation method which gives a declining amount of depreciation expense each year when declined book value of an asset is multipled by a fixed depreciation rate.

To calculate:

To determine depreciation using Declining Balance Method.

Explanation

Declining Balance Rate − (m)*Straight Line rate

The multiple m is often 2 as the name suggests “Double”

Declining Balance Depreciation expense = Declining Balance Rate *Book Value

Value of delivery truck - $45000

Useful Life = 5 years

Depreciation Rate

= 2*(1/5)

=2/5

=40%

Cost of asset as o 01.01.2019 =45000

Depreciation for 2019 = 45000*40% =18000

Written down balance as on 01.01.2020 =45000-18000 = $27000

Depreciation for 2020 =27000*40% =10800

Journal Entries in the books of Irons Delivery Inc

Date Particulars Debit Credit
31...

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