Question

In: Accounting

Depreciation for Partial Periods Bar Delivery Company purchased a new delivery truck for $36,000 on April...

Depreciation for Partial Periods

Bar Delivery Company purchased a new delivery truck for $36,000 on April 1, 2019. The truck is expected to have a service life of 10 years or 180,000 miles and a residual value of $3,000. The truck was driven 12,000 miles in 2019 and 16,000 miles in 2020. Bar computes depreciation expense to the nearest whole month.

Required:

  1. Compute depreciation expense for 2019 and 2020 using the following methods: (Round your answers to the nearest dollar.)
    1. Straight-line method
      2019 $ fill in the blank 1
      2020 $ fill in the blank 2
    2. Sum-of-the-years'-digits method
      2019 $ fill in the blank 3
      2020 $ fill in the blank 4
    3. Double-declining-balance method
      2019 $ fill in the blank 5
      2020 $ fill in the blank 6
    4. Activity method
      2019 $ fill in the blank 7
      2020 $ fill in the blank 8
  2. For each method, what is the book value of the machine at the end of 2019? At the end of 2020? (Round your answers to the nearest dollar.)
    1. Straight-line method
      2019 $ fill in the blank 9
      2020 $ fill in the blank 10
    2. Sum-of-the-years'-digits method
      2019 $ fill in the blank 11
      2020 $ fill in the blank 12
    3. Double-declining-balance method
      2019 $ fill in the blank 13
      2020 $ fill in the blank 14
    4. Activity method
      2019 $ fill in the blank 15
      2020 $ fill in the blank 16

Solutions

Expert Solution

1 Depreciation under SLM= Original cost - Scrap Value / Useful Life
36000 - 3000 / 10
3300
Straight-line method 2019 2020
Depreciation Expense= 2475 3300
(3300 * 9months/ 12 months)
Year 2019 30525 (33000-2475
2020 27225 (30525-3300
2 Sum of Year of Digit Method
Year Estimated useful life SYD Annual Deprecitaion Book Value at the end
2019 10 10/55 6000 (33000*10/55') 27000 (33000-6000)
2020 9 9/55' 5400 (33000 * 9 / 55') 21600 (27000-5400)
2021 8
2022 7
2023 6
2024 5
2025 4
2026 3
2027 2
2028 1
55
3 Double Declining Method Rate
Double Declining Rate = 100 / Useful Life * 100
Double Declining Method Rate = 10 / 100 * 100
Double Declining Method Rate = 10%
Double Declining Method Rate = Double Declining Rate * 2
10 * 2'
Double Declining Method Rate = 20%
Year Book Value at Begaining Depreciation Depreciation at the end
2019 36000 7200 28800
2020 28800 5760 23040
4) Activity Based Depreciation
Depreciation =( Cost of Assets - Salvage)* Actual Activity / Estimated Activity

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