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On January 1, Year 1, Missouri Co. purchased a truck that cost $40,000. The truck had an expected useful life of 10 years and a $4,000 salvage value. The amount of depreciation expense recognized in Year 2 assuming that Missouri uses the double declining-balance method is:

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Answer:

$6,400

Explanation:

The computation of depreciation expense is shown below:-

Rate of Depreciation = 1 ÷ 10 × 2

= 0.2

Depreciation year 1 = Purchased cost × Depreciation percentage

= $40,000 × 20%

= $8,000

Depreciation year 2 = Purchased cost - Depreciation year 1 × Depreciation percentage

= $40,000 - $8,000 × 20%

= $32,000 × 20%

= $6,400

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