Question

During 2017, Bush Company acquired three assets with the following costs, estimated useful lives, and estimated salvage values:

Date	Asset	Cost		Estimated Useful Life		Estimated Salvage Value
February 27	Truck	$41,200		5 years		$7,000
June 22	Computer	31,000		6 years		2,800
September 4	Building	241,600		28 years		40,000

The company uses the straight-line method to depreciate all assets and computes depreciation to the nearest month. For example, the computer system will be depreciated for six months in 2017.

Required:

1. Compute the depreciation expense that Bush will record on each of the three assets for 2017. Do not round intermediate calculations. If required, round your answers to the nearest dollar.

Asset	Depreciation Expense
Truck	$
Computer	$
Building	$

Answer 1

Solution

Depreciation calculation using straight line method

Formula = (Cost of asset – Salvage value) ÷ Use full life

Truck depreciation

= ($ 41200 - $ 7000) ÷ 5

= $34200 ÷ 5 = $6840 per year

Truck purchase date (2-27-2017) so depreciation is calculated for 10 months

= $ 6840 × 10 / 12 = $ 5700

Computer depreciation

= ($ 31000 - $ 2800) ÷ 5

= $28200 ÷ 6 = $4700 per year

Computer purchase date (6-22-2017) so depreciation is calculated for 6 months

= $ 4700 × 6 / 12 = $ 2350

Building depreciation

= ($ 241600 - $ 40000) ÷ 5

= $201600 ÷ 28 = $7200 per year

Building purchase date (9-04-2017) so depreciation is calculated for 4 months

= $ 7200 × 4 / 12 = $ 2400

Asset name	Depreciation expenses in 2017
Truck	$5700
Computer	$2350
Building	$2400