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26 February, 20:44

Tidy Limited purchased a new van on January 1, 2018. The van cost $32,000. It has an estimated life of eight years and the estimated residual value is $3,200. Tidy uses the double-declining-balance method to compute depreciation. What is the adjusted balance in the Accumulated Depreciation account at the end of 2019

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  1. 26 February, 20:52
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    The adjusted balance in the Accumulated Depreciation account at the end of 2019 is $14,000.

    Explanation:

    Given:

    Cost of van = $32,000

    Estimated residual value = $3,200

    Straight-line Depreciation Rate = 1/8

    = 0.125

    Straight-line Depreciation Rate = 12.5%

    Declining Balance Rate = 2 * 12.5%

    = 25%

    Double declining balance can be calculated with the following formula:

    2 x basic depreciation rate x book value

    By applying the values,

    The adjusted balance in the Accumulated Depreciation account = $14,000.
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