Question

26. D-Signs purchased a new delivery truck on June 30, 2015, for $15,150 and a $5,000 delivery fee. The company estimated the truck would be used for 15 years with a $1,200 residual value. At the beginning of 2018, D-Signs revises its estimate of the useful life to 12 total years with a $1,500 residual value. If the company uses the straight-line method to calculate depreciation expense, determine the following:

a. Accumulated depreciation to date (round to the nearest whole dollar)

b. Book value of the truck at the beginning of 2018

c. Revised annual depreciation expense (round to the nearest whole dollar)

Answer 1

• All working forms part of the answer
• Requirement ‘a’

A	Cost	$                  20,150.00
B	Residual Value	$                    1,200.00
C=A - B	Depreciable base	$                  18,950.00
D	Life [in years]	15
E=C/D	Annual SLM depreciation	$                    1,263.33
F = E x 6/12	2015's 6 month depreciation	$                        631.67
G = E	2016 annual depreciation	$                    1,263.33
H = E	2017 annual depreciation	$                    1,263.33
I F+G+H	Accumulated Depreciation to date	$                    3,158.33 = Answer

Accumulated Depreciation to Date = $ 3,158

• Requirement ‘b’

A	Original Cost	$          20,150.00
B	Accumulated Depreciation to date	$             3,158.00
C = A - B	Book Value of the truck at the beginning of 2018	$          16,992.00

• Requirement ‘c’

A	Original Cost	$          20,150.00
B	Accumulated Depreciation to date	$             3,158.00
C = A - B	Book Value	$          16,992.00
D	New Salvage value	$             1,500.00
E = C - D	New Depreciable base	$          15,492.00
H = 12 years - 2.5 years expired	New remaining life	9.5
I = E/H	Revised Annual Depreciation expense	$             1,630.74

Revised Annual Depreciation expense = $ 1,631