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Question #2 (Partial Year Depreciation): On August 1, 2016, Faka Manufacturing purchases a truck for $46,000....

Question #2 (Partial Year Depreciation): On August 1, 2016, Faka Manufacturing purchases a truck for $46,000. The truck has an expected useful life of 3 years, with a $2,000 salvage value. Calculate depreciation expense for 2016, 2017, 2018 & 2019. Be careful about 2019. This is another partial year and you can't depreciate below salvage value.

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Answer #1

Cost of truck = $46,000

Salvage value = $2,000

Expected useful life = 3 years

Depreciable cost = Cost of truck - Salvage value

= 46,000-2,000

= $44,000

Annual depreciation expense = (Cost of truck-Salvage value )/expected useful life

= (46,000-2,000)/3

= $14,667 ( round off to whole number)

Depreciation expense for year 2016 (for 5 months, August 1 to December 31) = Annual depreciation x 5/12

= 14,667 x 5/12

= $6,111 ( round off to whole number)

Depreciation expense from 2017 = Annual depreciation expense

= 14,667

Depreciation expense from 2018 = Annual depreciation expense

= 14,667

Depreciation expense for year 2019 (for 7 months, January1 to July 31) = Annual depreciation x 7/12

= 14,667 x 7/12

= $8,556 ( round off to whole number)

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