Question

# Depreciation Methods ABC Co purchased a truck on January 1, 2015 for \$25,000; it cost \$2500...

Depreciation Methods

ABC Co purchased a truck on January 1, 2015 for \$25,000; it cost \$2500 to have it delivered, \$1500 to have it installed, and taxes and title fees were \$600 and \$400, respectively. The truck has an estimated salvage value of \$6,000 and is expected to last 5 years and 150,000 miles.

1. Calculate depreciation expense and book value for each year under the Straight Line Method and the Double Declining Balance. (10 Points each)

Straight Line                                            Double-Declining Balance

Year       Expense                    Book Value...................................                      Expense                           Book Value

2015

2016

2017

2018

2019

1. Assume the truck was driven 22,000 miles in 2018 and 25,000 miles in 2019. Calculate depreciation expense and book value for the last two years using the units-of-activity depreciation method. (5 Points)

Year      Units of Activity       Expense                    Book Value

2018      22,000

2019      25,000

 Cost of the Asset =\$25,000 + \$2,500 + \$1,500 + \$600 + \$400 =\$30,000 Straight Line method Year Cost of asset Depreciable cost Depreciation rate Depreciation expenses Accumulated Depreciation Book value At Acquistion \$30,000 2015 \$30,000 \$24,000 20.00% \$4,800 \$4,800 \$25,200 2016 \$30,000 \$24,000 20.00% \$4,800 \$9,600 \$20,400 2017 \$30,000 \$24,000 20.00% \$4,800 \$14,400 \$15,600 2018 \$30,000 \$24,000 20.00% \$4,800 \$19,200 \$10,800 2019 \$30,000 \$24,000 20.00% \$4,800 \$24,000 \$6,000 Units of production Date Depreciable cost Depreciation per mile No. of miles Depreciation expenses Accumulated Depreciation Book value At Acquistion \$30,000 2015 \$24,000 \$0.16 22000 \$3,520 \$3,520 \$26,480 2016 \$24,000 \$0.16 25000 \$4,000 \$7,520 \$22,480 Double Declining balance Date Cost of asset Book Value DDB Rate Depreciation expenses Accumulated Depreciation Book value At Acquistion \$30,000 2015 \$30,000 \$30,000 40.00% \$12,000 \$12,000 \$18,000 2016 \$30,000 \$18,000 40.00% \$7,200 \$19,200 \$10,800 2017 \$30,000 \$10,800 40.00% \$4,320 \$23,520 \$6,480 2018 \$30,000 \$6,480 40.00% \$480 \$24,000 \$6,000 2019 \$30,000 \$6,000 40.00% \$0 \$24,000 \$6,000