Question

9. Alpha Company has the following items in its equipment account: Asset &Date Purchased Method of Depreciation Cost Salvage Value 1 Delivery Truck (4/30/15) Units of Activity $60,000 $11,000 2 Office Furniture (6/1/15/) Straight line $15,000 $500 3 Computer Double Declining $5,000 $700 The delivery truck is estimated to have a life cycle of 200,000 miles. It was driven for 1. 16,500 miles in 201 24,600 miles in 2016 2. The Computer Furniture has a life expectancy of 7 years 3. The Computer has a life expectancy of 4 years Round any per unit calculations to the nearest half penny. Round all annual depreciation expenses to the nearest dollar. Use this information to compute for Fiscal Year 2016 the following values: 1. Book Value of the Delivery Truck 2. Depreciation Expense- Truck 3. Book value of the office furniture 4. Depreciation Expense- Office Furniture 5. Book value of the Computer 6. Depreciation Expense- Computer

Answer 1

1	Straight line depreciation = (Cost of asset - salvage value )/ Life of the asset		Office furniture
	Depreciation expense = (15000-500) /7	2071	Accumulated depreciation
		Depreciation expense		Book value
			0	15000
2015	2071*7/12	1,208	1,208	13,792
2016	2071*12/12	2,071	3,279	11,721
2	Double declining method	Computer
	Depreciation rate = [(cost of asset / life of asset ) / cost of asset ] *2
	Depreciation rate = [5,000/4)/15,000] *2
	Depreciation rate = 50%
	Depreciation = written down value * depreciation rate		Accumulated depreciation
		Depreciation expense		Book value
				5000
2015	Depreciation = 5,000 * 50%	2500	2,500	2,500
2016	Depreciation = (5000-2500) *50%   =	1,250	3,750	1,250
3	Units of production method	Delivery truck
	Depreciation per machine hour = (Cost of asset - salvage value )/ total machine hour
	Depreciation per machine hour = (60,000-11,000 )/200,000
	Depreciation per item	0.25	Accumulated depreciation
		Depreciation expense		Book value
				60000
2015	.25*16500	4125	4,125	55,875
2016	.25*24600	6150	10,275	49,725