Use the following data for the next three questions. Roundal calculations to the

Question

Use the following data for the next three questions. Roundal calculations to the whole dollar!) ulations to the nearest On July 1, 2011 Dawn Company purchased a delivery truck for $95,000. The estimated usef life of the truck is five years, during which time it will be driven about 200,000 miles. Estinted residual value is $5,000. 9. If Dawn Company uses the sum-of the years'-digts method of depreciation, he asy expense for 2012 will be: 10. If Dawn Company uses the double-declining-balance method of depreciation, the accu ion balance at December 31, 2011 (after adjusting entries) will be: wn Company uses the straight-line method of depreciation, the book value of the aset 2013, (after adjusting entries), wi ll be: rember 31,

Explanation / Answer

Answer = 11) CALCULATION OF THE DEPRECIATION AS PER STRAIGHT LINE METHOD Purchase Cost of Machine $                      95,000 Less: Salvage Value $                        5,000 Net Value for Depreciation $                      90,000 Usefule life of the Assets 5 years Depreciation per year = Value for Depreciation / 5 years = $                      18,000 Purchase value of the Machiene = $                      95,000 Depreciation for the year 2011 = $ 18000 X 6 months / 12 months= $                        9,000 Closing Value as for year end 2011 $                      86,000 Depreciation for the year 2012 $                      18,000 Depreciation for the year 2013 $                      18,000 Closing Book Value as for year end December 31, 2013 $                      50,000 Answer = 10) CALCULATION OF THE DEPRECIATION AS PER DOUBLE DECLINE METHOD Purchase Cost of Machine $                95,000.00 Useful Life = 5 years Depreciation per year = $                19,000.00 (Purchase price / Useful life) Rate of Depreciation = Rate of Depreciation = (1 / 5 Years ) 0.20 or 20% (Depreication / Purchase price ) Double decline deprection rate = 20% * 2 = 40.0% Purchase Value of the Assets $                95,000.00 Depreciation for the year 2011 @ 40% X 0.5 Year = 20% = $                19,000.00 Closing balance for the year2011 $                76,000.00 Answer = Accumulated Depreciation for the year 2011 =                    19,000.00 Answer = 09) CALCULATION OF THE DEPRECIATION AS PER SUM OF DIGITS METHOD Purchase Cost of Machine $                95,000.00 Less: Salvage Value $                  5,000.00 Net Value for Depreciation $                90,000.00 SUM OF DIGITS = 1+2+3+4+5 =15 For the year 2011 , 2012 & 2013 Digits is 5,4 & 3 respectively Depreciation for the year So depreciation for the year 2011 = ($ 90,000 * 5 /15) X 0.5 = $                15,000.00 Depreciation for the year 2012 For balance of 6 months as first year So depreciation for the year 2012 = ($ 90,000 * 5 /15) X 0.5 = $                15,000.00 So depreciation for the year 2012 = ($ 90,000 * 4 /15) X 0.5 = $                12,000.00 Total                    27,000.00 Answer = Total Depreciation for the year 2012 =                    27,000.00

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