In: Accounting
the pablo paving company purchased a new dump truck for $ 125,000 at the beginning of year 1. it's estimated that the residual value will be $15,00 and have a useful life of 5 years. prepare a depreciation schedule using each of the 4 methods. round % s to 2 decimal places
Answer
Total Cost of the Truck = $125,000
Salvage Value = $15,000
Useful Life = 5 Years
Straight Line Method
Depreciation Per year = (Cost – Salvage Value) / Useful Life
= (125,000 - 15,000) / 5
= $22,000 per year
Depreciable value = Cost – Salvage Value
= 110,000 (125,000 – 15,000)
Depreciation Rate = 1 / Useful Life
1 / 5
Depreciation Rate = 20%
Depreciation = Depreciation rate * Cost
Depreciation for the Year |
||||||
Date |
Asset Cost |
Depreciable Cost |
Depreciation Rate |
Depreciation Expense |
Accumulated Depreciation |
Book Value |
125,000 |
125,000 |
|||||
Year 1 |
110,000 |
20% |
22,000 |
22,000 |
103,000 |
|
Year 2 |
110,000 |
20% |
22,000 |
44,000 |
81,000 |
|
Year 3 |
110,000 |
20% |
22,000 |
66,000 |
59,000 |
|
Year 4 |
110,000 |
20% |
22,000 |
88,000 |
37,000 |
|
Year 5 |
110,000 |
20% |
22,000 |
110,000 |
15,000 |
Sum of the Year digit Method
Depreciable Value = 110,000 (125,000 – 15,000)
Depreciation = Fraction * Depreciable Value
Year |
Cost |
Remaining Life of Machine |
Fraction |
Depreciation |
1 |
$110,000 |
5 |
5/15 |
36,667 |
2 |
$110,000 |
4 |
4/15 |
29,333 |
3 |
$110,000 |
3 |
3/15 |
22,000 |
4 |
$110,000 |
2 |
2/15 |
14,667 |
5 |
$110,000 |
1 |
1/15 |
7,333 |
Total |
15 |
Double Declining Balance
Depreciation rate = 2 * Straight line depreciation rate
= 2 * 20%
Depreciation rate = 40%
Depreciation = Book Value * Depreciation Rate
Depreciation for the Year |
||||||
Date |
Asset Cost |
Depreciable Cost |
Book Value |
Depreciation Rate |
Depreciation Expense |
Accumulated Depreciation |
Beginning Year 1 |
125,000 |
125,000 |
||||
Year 1 |
125,000 |
75,000 |
40% |
50,000 |
50,000 |
|
Year 2 |
45,000 |
40% |
30,000 |
80,000 |
||
Year 3 |
27,000 |
40% |
18,000 |
98,000 |
||
Year 4 |
16,200 |
40% |
10,800 |
108,800 |
||
Year 5 |
9,720 |
40% |
6,480 |
115,280 |
MACRS Method
Depreciation = Rate * Cost of Truck
Year |
Asset Cost |
Depreciable Cost |
Depreciation Rate |
Depreciation Expense |
Accumulated Depreciation |
Book Value |
Beginning Year 1 |
125,000 |
|||||
Year 1 |
125,000 |
20.00% |
25000 |
25000 |
100,000 |
|
Year 2 |
125,000 |
32.00% |
40000 |
65000 |
60,000 |
|
Year 3 |
125,000 |
19.20% |
24000 |
89000 |
36,000 |
|
Year 4 |
125,000 |
11.52% |
14400 |
103400 |
21,600 |
|
Year 5 |
125,000 |
11.52% |
14400 |
117800 |
7,200 |
|
Year 6 |
125,000 |
5.76% |
7200 |
125000 |
0 |