Depreciation for Partial Periods Lightning Delivery Company purchased a new deli
ID: 2422954 • Letter: D
Question
Depreciation for Partial Periods
Lightning Delivery Company purchased a new delivery truck for $45,000 on April 1, 2013. The truck is expected to have a service life of 10 years or 120,000 miles and a residual value of $3,000. The truck was driven 10,000 miles in 2013 and 13,000 miles in 2014. Lightning computes depreciation to the nearest whole month.
Required:
Compute depreciation expense for 2013 and 2014 using the
(Round your answers to the nearest dollar.)
Straight-line method
Sum-of-the-years'-digits method
Double-declining-balance method
Activity method
For each method, what is the book value of the machine at the end of 2013? At the end of 2014?
(Round your answers to the nearest dollar.)
Straight-line method
Sum-of-the-years'-digits method
Double-declining-balance method
Activity method
2013 $ 2014 $Explanation / Answer
Cost
45000
Residual value
3000
Life
10 years
Miles
120000
Straight line method
Depreciation for 2013 = (45,000-3,000)/10*9/12
3,150
Depreciation for 2014 = (45,000-3,000)/10
4,200
Sum of years digit method
Sum of years = 1+2+3+4+5+6+7+8+9+10
55
Depreciation for 2013 = (45,000-3,000)*10/55*9/12
5,727.27
Depreciation for 2014 = (45,000-3,000)*9/55
6,872.73
Double declining balance method: 2*Straight line depreciation rate*Book value at the beginning of the year
Straight line depreciation rate = Depreciation for year / (cost of asset - residual value)
4,200/ (45,000-3,000) = 10%
Depreciation for 2013 = 2*10%*45,000*9/12
6,750
Depreciation for 2014 = 2*10%*(45,000-6,750)
7,650
Activity method : Depreciation per mile = (Cost of the asset - salvage value)/ Estimated miles
Depreciation per mile = (45,000-3,000)/120,000
0.35
per mile
Depreciation for 2013 = 10,000*.35
3,500
Depreciation for 2014 = 13,000*0.35
4,550
Cost = 45,000
Depreciation
Book value
Straight line method
Depreciation for 2013 = (45,000-3,000)/10*9/12
3,150
41,850
Depreciation for 2014 = (45,000-3,000)/10
4,200
37,650
Sum of years digit method
Depreciation for 2013 = (45,000-3,000)*10/55*9/12
5,727.27
39,272.73
Depreciation for 2014 = (45,000-3,000)*9/55
6,872.73
32,400.00
Double declining balance method
Depreciation for 2013 = 2*10%*45,000*9/12
6,750
38,250.00
Depreciation for 2014 = 2*10%*(45,000-6,750)
7,650
30,600.00
Activity method
Depreciation for 2013 = 10,000*.35
3,500
41,500.00
Depreciation for 2014 = 13,000*0.35
4,550
36,950.00
Cost
45000
Residual value
3000
Life
10 years
Miles
120000
Straight line method
Depreciation for 2013 = (45,000-3,000)/10*9/12
3,150
Depreciation for 2014 = (45,000-3,000)/10
4,200
Sum of years digit method
Sum of years = 1+2+3+4+5+6+7+8+9+10
55
Depreciation for 2013 = (45,000-3,000)*10/55*9/12
5,727.27
Depreciation for 2014 = (45,000-3,000)*9/55
6,872.73
Double declining balance method: 2*Straight line depreciation rate*Book value at the beginning of the year
Straight line depreciation rate = Depreciation for year / (cost of asset - residual value)
4,200/ (45,000-3,000) = 10%
Depreciation for 2013 = 2*10%*45,000*9/12
6,750
Depreciation for 2014 = 2*10%*(45,000-6,750)
7,650
Activity method : Depreciation per mile = (Cost of the asset - salvage value)/ Estimated miles
Depreciation per mile = (45,000-3,000)/120,000
0.35
per mile
Depreciation for 2013 = 10,000*.35
3,500
Depreciation for 2014 = 13,000*0.35
4,550
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