Question

Bean Delivery Company purchased a new delivery truck for $58,200 on April 1, 2016. The truck is expected to have a service life of 5 years or 122,400 miles and a residual value of $4,800. The truck was driven 9,000 miles in 2016 and 10,700 miles in 2017. Bean 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 answer 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

Depreciation expense calculation under:

Straight Line Method : Cost - salvage value /useful life = $58200-$4800 / 5 = $10680.

For 2016: Depreciation will be for 9 months = $10680*9/12 = $8010

For 2017 : Depreciation for full year = $10680.

Sum of the years' digits method : sum of years for 5 years = 1+2+3+4+5= 15

Depreciation expense = (cost-salvage value) * Remaining life of asset / sum of years' digit

For 2016 (9 months) = ($58200-$4800) * 5/15*9/12= $53400*5/15= $17800*9/12= $13350

For 2017 : $53400 *4/15 = $14240

Double declining balance method : 2* 1/useful life * (cost -accumulated deprecition)

For 2016 (9 months) : 2*1/5*58200*9/12 = 0.4*58200*9/12 = $23280*9/12 = $17460

For 2017: 2*1/5* (58200-23280) = 0.4*34920 = $13968

Activity method : cost - scrap value / miles = $58200- $ 4800/122400 = $0.43 / miles

For 2016 : 9000* $0.43= $3870

For 2017 : 10700 * $0.43 = $4601

Calculation of book value of machine under :

Straight line method : For 2016 : Book value - Depreciation expense = $58200-$8010= $50190

For 2017 : $50190- $10680 = $39510

Sum of the years' digits method :

For 2016 : $58200-$13350= $44850

For 2017 : $44850-$14240 = $30610

Double declining balance method :

For 2016: $58200-$ 17460 = $40740

For 2017: $40740- $13968 = $26772

Activity method:

For 2016: $58200-$3870= $54330

For 2017: $54330-$4601= $49729