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the pablo paving company purchased a new dump truck for $ 125,000 at the beginning of...

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

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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


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