Question

In: Accounting

Ivan Manufacturing purchased equipment and a delivery van on January 1, 2020. The equipment cost $95,000...

Ivan Manufacturing purchased equipment and a delivery van on January 1, 2020. The equipment cost $95,000 and has an estimated useful life of 8 years with a residual value of $10,000.

The delivery van cost $125,000 and has an estimated life of 5 years or 200,000 kilometres and a residual value of $20,000. The delivery truck is expected to be driven 25,000 and 50,000 kilometres in 2019 and 2020, respectively.

Required

Ivan has decided to depreciate the equipment using either the straight-line method or double declining method. Calculate depreciation for the equipment for 2020 and 2021 using the straight-line method AND the double declining method.
Ivan has decided to depreciate the delivery van using the units-of-production method. Calculate depreciation for the delivery truck for 2020 and 2021.

	2020 Depreciation	2021 Depreciation
Requirement # 1
Equipment – Straight-line method






Equipment – Double-Declining method








Requirement # 2
Delivery Van – Units-of-Production

Expert Solution

(1) Computation of Depreciation on Equipment for FY 2020 & 2021 using:

(a) Straight-line method

Depreciation per year under straight-line method = (Cost-Salvage Value)/Useful Life

Particulars		Equipment
		$
Purchase Cost	A	95,000
Estimated Salvage value	B	10,000
Value to be depreciated in its useful life	C=A-B	85,000
Useful Life of Asset (in Years)	D	8
Depreciation value per year as per SLM	E=C/D	10,625

Therefore, depreciation for 2020 & 2021 under Straight-line method = $10,625.

(b) Double Declining method:

Double Declining Depreciation = Net Book Value at the beginning of year * Double Declining rate

Double Declining rate = (100/Useful life)*2 = (100/8)*2 = 25%

Depreciation expense for the Year 2020 = $95,000*25% = $23,750

Net Book value at the beginning of Year 2021 = $95,000 - $23,750 = $71,250.

Depreciation expense for the Year 2021 = $71,250*25% = $17,812.5

(2) Computation of Depreciation on Delivery Van for FY 2020 & 2021 using units-of-production method:

Units-of-production Depreciation rate = (Cost of Asset - Residual Value) / Total Units of production

Units-of-production Depreciation rate= ($125,000-$20,000)/200,000 Kilometers = $0.525 per Kilometers

Depreciation Expense = Units of production Depreciation x Kilometers Driven

Therefore, depreciation expense for the Year 2020 = 25,000 Kilometers * $0.525 = $13,125

Therefore, depreciation expense for the Year 2021 = 50,000 Kilometers * $0.525 = $26,250

ekkarill92 answered 2 years ago

On January 1, 2020, Betty DeRose, Inc. purchased equipment for $95,000. The equipment was assigned an...

On January 1, 2020, Betty DeRose, Inc. purchased equipment for $95,000. The equipment was assigned an estimated useful life of 15 years and a salvage value of $15,200. On January 1, 2024, Betty DeRose decided the life of the equipment should be changed from 15 to 25 years with a salvage value of $8,200 at the end of the 25 years. Betty DeRose uses the straight-line depreciation method to calculate depreciation on its assets. Calculate the book value of the...

On January 1, 2018, the Excel Delivery Company purchased a delivery van for $52,000. At the...

On January 1, 2018, the Excel Delivery Company purchased a delivery van for $52,000. At the end of its five-year service life, it is estimated that the van will be worth $4,000. During the five-year period, the company expects to drive the van 150,000 miles. Required: Calculate annual depreciation for the five-year life of the van using each of the following methods. 1. Straight line. 2. Sum-of-the-years’-digits. 3. Double-declining balance. 4. Units of production using miles driven as a measure...

On January 1, 2021, the Excel Delivery Company purchased a delivery van for $46,000. At the...

On January 1, 2021, the Excel Delivery Company purchased a delivery van for $46,000. At the end of its five-year service life, it is estimated that the van will be worth $4,000. During the five-year period, the company expects to drive the van 165,000 miles. Required: Calculate annual depreciation for the five-year life of the van using each of the following methods. rev: 05_15_2019_QC_CS-168776, 11_22_2019_QC_CS-191707 Exercise 11-1 (Algo) Part 1 1. Straight line. 2. Double-declining balance. (Round your answers to...

On January 1, 2018, the Excel Delivery Company purchased a delivery van for $57,000. At the...

On January 1, 2018, the Excel Delivery Company purchased a delivery van for $57,000. At the end of its five-year service life, it is estimated that the van will be worth $5,400. During the five-year period, the company expects to drive the van 172,000 miles. Required: Calculate annual depreciation for the five-year life of the van using each of the following methods. 1. Straight line. 2. Sum-of-the-years’-digits. 3. Double-declining balance. 4. Units of production using miles driven as a measure...

1.) Carrie Heffernan Company purchased a delivery van on January 1, 2016, for $50,000. The van...

1.) Carrie Heffernan Company purchased a delivery van on January 1, 2016, for $50,000. The van was expected to remain in service 4 years (or 100,000 miles) and has a residual value of $5,000. The van traveled 30,000 miles the first year, 25,000 miles the second year, and 22,500 miles in the third and fourth years. Required: 1. Prepare a schedule of depreciation expense per year for the first four years of the asset's life using the (a) straight-line method,...

6. on January 3, 2018, fast delivery service purchased a truck at a cost of $95,000....

6. on January 3, 2018, fast delivery service purchased a truck at a cost of $95,000. Before placing the truck in service, fast spent $2,200 painting it, $500 replacing tires, and $11,300 overhauling the engine. The truck should remain in service for five years and have a residual value of $10,000. The truck annual mileage is expected to be 26,000 miles in each of the first four years in 19,750 miles in the fifth year- 123,750 Miles in total. And...

On January 1, 2006 the Excel Delivery Company purchased a delivery van for $65,000. Useful life...

On January 1, 2006 the Excel Delivery Company purchased a delivery van for $65,000. Useful life is 5 years and it has a salvage value of $15,000 The company expects to drive the van 125,000 miles The following is the actual miles driven 2006 – 40,000 miles 2007 – 35,000 miles 2008 – 25,000 miles 2009 – 21,000 miles 2010 – 11,000 miles Required – Calculate annual depreciation for the five year life of the van using each of the...

A company purchased a new delivery van at a cost of $60,000 on July 1. The...

A company purchased a new delivery van at a cost of $60,000 on July 1. The delivery van is estimated to have a useful life of 6 years and a salvage value of $4800. The company uses the straight line method of depreciation. How much depreciation expense will be recorded for the van during the first year ended December 31? a. $5,000 b. $6,480 c. $4,600 d. $9,200 e. $5,600

On January 1, 2018, Betty DeRose, Inc. purchased equipment for $95,000. The equipment was assigned an...

On January 1, 2018, Betty DeRose, Inc. purchased equipment for $95,000. The equipment was assigned an estimated life of 15 years and a salvage value of $12,500. On January 1, 2021, Betty DeRose decided the life of the equipment should be changed from 15 to 25 years with a salvage value of $5,900 at the end of the 25 years. Betty DeRose uses the straight-line method to depreciate its assets. Calculate the book value of the equipment at December 31,...

Trainex Corporation purchased equipment on January 1, 2020 at a cost of $500,000. The equipment has...

Trainex Corporation purchased equipment on January 1, 2020 at a cost of $500,000. The equipment has an estimated residual value of $50,000 and an estimated life of 5 years. At the end of two years, Trainex reevaluated the useful life of the equipment. Management extended the total useful life an additional 5 years but estimated that the equipment would have no residual value at the end of this time. If the company uses straight-line depreciation, what amount (in whole dollars)...