Question

Depreciation for Partial Periods

Chambers Delivery Company purchased a new delivery truck for $46,200 on April 1, 2016. The truck is expected to have a service life of 10 years or 130,800 miles and a residual value of $4,680. The truck was driven 9,700 miles in 2016 and 13,400 miles in 2017. Chambers computes depreciation to the nearest whole month.

Required:

Compute depreciation expense for 2016 and 2017 using the
For interim computations, carry amounts out to two decimal places. Round your final answers to the nearest dollar.
Straight-line method

2016	$
2017	$

Sum-of-the-years'-digits method

2016	$
2017	$

Double-declining-balance method

2016	$
2017	$

Activity method

2016	$
2017	$

For each method, what is the book value of the machine at the end of 2016? At the end of 2017?
(Round your answers to the nearest dollar.)
Straight-line method

2016	$
2017	$

Sum-of-the-years'-digits method

2016	$
2017	$

Double-declining-balance method

2016	$
2017	$

Activity method

2016	$
2017	$

The book value of the asset in the early years of the asset's service will be(about the same, higher, or lower) under an accelerated method as compared to the straight-line method. The (activity, double declining,sum of , straight) method is appropriate when the service life of the asset is affected primarily by the amount the asset is used.

Answer 1

Straight line method

No of years = 10 years

Cost = 46200

Residual value = 4680

Under this method every year dep will be same

Dep per year = (cost - residual value) / no of years

= (46200 - 4680) / 10 = 4152

Year	Depreciation	Book value
2016	4152	(46200-4152) 42048
2017	4152	(42048-4152) 37896

Sum of the years method

Sum of years = n(n+1) / 2

n = no of years = 10

Sum of year numbers = 10*11/2 = 55

Dep per year = Cost * Year number in reverse order/ sum of year numbers

Dep in 2016 = (46200-4680) * 10 / 55 = 41520 * 10 / 55 = 7549

Dep in 2017 = (46200 - 4680) * 9 / 55 = 6794

Year	Depreciation	Book value
2016	7549	(46200-7549) 42048
2017	6794	(38651-6794) 31857

Double declining balance method

In this method rate of dep will be double of SLM.

hence dep rate will be 20% of written down value

Year	Depreciation	Book value
2016	(46200*20%) 9240	(46200-9240) 36960
2017	(36960*20%) 7392	(36960-7392) 29568

Activity method

In this method dep will be calculated based on no of miles it travelled in a year

Dep = (cost - residual value) / total miles * miles in current year

2016 = (46200 - 4680) / 130800 * 9700 = 3079

2017 = (46200 - 4680) / 130800 * 13400 = 4254

Year	Depreciation	Book value
2016	3079	(46200-3079) 43121
2017	4254	(43121-4254) 38867