25 Crestview Estates purchased a tractor on January 1 2018 f

25. Crestview Estates purchased a tractor on January 1, 2018, for $65,000. The tractor\'s useful life is estimated to be 10 years and has a residual value of $5,000. If Crestview uses the double-declining balance method of depreciation what is the amount of depreciation expense that Crestview will record on December 31, 2018, the end of the first year? A. $13,000 B. $12,000 C. $6,500 D. $6,000

Solution

Correct Answer is A. $13,000 Under Double Declining Balance Depreciation Method Depreciation Rate under Double declining Method = (100%/10years)*2 = 20% Depreciation Expense at the end of first year i.e on December,31 2018 ($65,000 X 20%) = $                    13,000