Question

Depreciation for Partial Periods

Clifford Delivery Company purchased a new delivery truck for $54,600 on April 1, 2016. The truck is expected to have a service life of 10 years or 109,200 miles and a residual value of $4,800. The truck was driven 11,300 miles in 2016 and 12,700 miles in 2017. Clifford 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 under an accelerated method as compared to the straight-line method. The 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:
	Depreciation for each year= (Cost-Salvage value)/Useful life of the asset=(54600-4800)/10=$ 4980
	2016	$ 4980
	Book value=54600-4980=$ 49620
	2017	$ 4980
	Book value=49620-4980=$ 44640
	Sum-of-the-years'-digits method:
	Sum of the years =10+9+8+7+6+5+4+3+2+1=55
	2016
	Applicable percentage=10/55=18.18 %
	Depreciation=(54600-4800)*18.18%=$ 9054
	Book value=54600-9054=$ 45546
	2017
	Applicable percentage=9/55=16.36 %
	Depreciation=(54600-4800)*16.36%=$ 8147
	Book value=45546-8147=37399
	Double declining balance method:
	Depreciation=Cost*double declining rate
	Double declining rate=2*Straight line rate=2*(1/10)=20%
	2016
	Depreciation=54600*20%=$ 10920
	Book value=54600-10920=$ 43680
	2017
	Depreciation=43680*20%=$ 8736
	Book value=43680-8736=34944
	Activity method:
	Depreciation per mile=(Cost-Salvage value)/expected miles driven=(54600-4800)/109200=0.46 per mile
	2016
	Miles driven=11300
	Depreciation=11300*0.46=$ 5198
	Book value=54600-5198=$ 49402
	2017
	Miles driven=12700
	Depreciation=12700*0.46=$ 5842
	Book value=49402-5842=$ 43560