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

Homework Answers

Answer #1
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
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