On 1/1/2015, Jason Company purchased a forklift for $155,000. The forklift has a

Question

On 1/1/2015, Jason Company purchased a forklift for $155,000. The forklift has a 5 year useful life and a residual value of $15,000. Jason Company chose to use the straight-line depreciation method for the forklift. Requirement 1: Calculate depreciation expense, accumulated depreciation and book value for the years ended 12/31/2015 and 12/31/2016. You Must Show Your Work to Receive Credit. Show your answers here: Requirement 2: Assume that Jason purchased the forklift on 7/1/2015 instead of 1/1/2015, calculate depreciation expense, accumulated depreciation and book value for the year ended 12/31/2015, 12/31/2016. Requirement 3: On 1/1/2017, Jason had to overhaul a truck engine at a cost of $10,000. Before the overhaul, the truck had a remaining useful life of 6 years and a book value of 85,000. The overhaul increased the life of the truck by 3 years. The truck's expected residual value at the end of its useful life is 5,000. Calculate depreciation expense for the year ended 12/31/2017.

Explanation / Answer

Answer 1:

Straight line depreciation = Total cost - residual value / useful life = 155,000 - 15,000 / 5 = $ 28,000 per year

In $

Answer 2:

Revised depreciation using straight line method = Revised book value - residual value / useful life

= (85,000 + 10,000) - 5,000 / (6+3) = $10,000 ( Depreciation expense for the year ended 12/31/2017)

Date Depreciation Expense (As calculated) Accumulated Depreciation(Last year balance of Accumulated Depreciation + Current year depreciation) Book Value(Total Cost(155,000) - Accumulated Depreciation) 12/31/2015              28,000                       28,000              127,000 12/31/2016              28,000                       56,000                99,000

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