From the following facts, prepare a depreciation schedule using the declining-balance method (twice the straight-line rate): (Input all amounts as positive values. Leave no cells blank - be certain to enter "0" wherever required.) Volvo truck $ 25,000 Residual value $ 5,000 Estimated life 5 years

Depreciation Schedule:

See attachment.

Explanation:

Cost of Truck = $25,000

Residual value = $5,000

Estimated life = 5 years

Method of depreciation = declining-balance method

Depreciable amount = $20,000 ($25,000 - $5,000)

Depreciation rate = 100/5 * 2 = 40%

1st year-end depreciation expense = $10,000 (40% of $25,000)

2nd year-end depreciation expense = $6,000 (40% of $15,000)

3rd year-end depreciation expense = $3,600 (40% of $9,000)

4th year-end depreciation expense = $400

Depreciation cannot exceed $400 for the 4th year because of the residual value of $5,000.  With declining method, the residual value is considered at the end of the useful life and not at the beginning.

Declining balance

Beginning of Year 1  Cost = $25,000

Beginning of Year 2 Balance = $15,000 ($25,000 - $10,000)

Beginning of Year 3 Balance = $9,000 ($15,000 - $6,000)

Beginning of Year 4 Balance = $5,400 ($9,000 - $3,600)

Beginning of Year 5 Balance = $5,000

correct, but each time you dont pay the price of the penalty can increase.

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