Question

Mahoney Moving Corporation purchased a new moving truck on January 2, 2014, for $95,000. The truck was expected to have a useful life of 4 years and a residual value of $15,000. The company estimated that the moving truck would be driven for a total of 20,000 miles. It was driven for 5,000 miles in 2014, 6,000 miles in 2015, 4,000 miles in 2016, and 5,000 miles in 2017. The company’s fiscal year ends on December 31.

Required:

1. Complete the following depreciation schedules for each year and be sure to show all of your handwritten calculations for the solutions for your depreciation schedules.

2. Create your own Excel Depreciation Spreadsheet using the following format for your own assignment.

3. Use mathematical formulas in your Excel Spreadsheet

Straight Line Depreciation

Year Depreciation Expense Accumulated Depreciation Book Value

2014 __________________ ______________________ __________

2015 __________________ ______________________ __________

2016 __________________ ______________________ __________

2017 __________________ ______________________ __________

Double Declining Balance

Year Depreciation Expense Accumulated Depreciation Book Value

2014 __________________ ______________________ __________

2015 __________________ ______________________ __________

2016 __________________ ______________________ __________

2017 __________________ ______________________ __________

Units of Production

Year Depreciation Expense Accumulated Depreciation Book Value

2014 __________________ ______________________ __________

2015 __________________ ______________________ __________

2016 __________________ ______________________ __________

2017 __________________ ______________________ __________

What would the general journal entry be if the Mahoney Moving Corporation was using the Straight Line Depreciation Method and the moving truck was sold for $30,000 at the end of 2015?

4. What would the general journal entry be if the Mahoney Moving Corporation used the Double-Declining Balance Depreciation method and the moving truck was sold for $40,000 at the end of 2016?

5. What would the general journal entry be if the Mahoney Moving Corporation used the Production Depreciation method and the moving truck was sold for $10,000 at the end of 2017?

Answer 1

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Straight Line Method:
Year		Depreciation Expense	Accumulated Depreication	Book Value
Purchase				$      95,000
2014	(95000-15000)/4	$                       20,000	$                               20,000	$      75,000
2015	(95000-15000)/4	$                       20,000	$                               40,000	$      55,000
2016	(95000-15000)/4	$                       20,000	$                               60,000	$      35,000
2017	(95000-15000)/4	$                       20,000	$                               80,000	$      15,000
Double Declining	Rate	(1/4)*2	50%
Year		Depreciation Expense	Accumulated Depreication	Book Value
Purchase				$      95,000
2014	95000*50%	$                       47,500	$                               47,500	$      47,500
2015	47500*50%	$                       23,750	$                               71,250	$      23,750
2016	23750-15000	$                         8,750	$                               80,000	$      15,000	Since 50% calculation will take Book Value below salvage value, balance of book value will be considered
2017		$                               -	$                               80,000	$      15,000
Year 2016 Note:
Since 50% calculation will take Book Value below salvage value, balance of book value will be considered
Unit of Production:
Year		Depreciation Expense	Accumulated Depreication	Book Value
Purchase				$      95,000
2014	80000/20000*5000	$                       20,000	$                               20,000	$      75,000
2015	80000/20000*6000	$                       24,000	$                               44,000	$      51,000
2016	80000/20000*4000	$                       16,000	$                               60,000	$      35,000
2017	80000/20000*5000	$                       20,000	$                               80,000	$      15,000
Sale:
Account	Debit	Credit
Cash	$                     30,000
Accumulated Depreciation	$                     40,000
Loss on Sale of Equipment	$                     25,000
Equipment		$                       95,000
Account	Debit	Credit
Cash	$                     40,000
Accumulated Depreciation	$                     80,000
Gain on Sale of Equipment		$                       25,000
Equipment		$                       95,000
Account	Debit	Credit
Cash	$                     10,000
Accumulated Depreciation	$                     80,000
Loss on Sale of Equipment	$                       5,000
Equipment		$                       95,000