Linton Company purchased a delivery truck for $30,800 on January 1, 2014. The tr

Question

Linton Company purchased a delivery truck for $30,800 on January 1, 2014. The truck has an expected salvage value of $1,700, and is expected to be driven 108,000 miles over its estimated useful life of 10 years. Actual miles driven were 14,100 in 2014 and 13,000 in 2015. Calculate depreciation expense per mile under units-of-activity method. (Round answer to 2 decimal places, e.g. 0.50.) Compute depreciation expense for 2014 and 2015 using the straight-line method, the units-of-activity method, and the double-declining-balance method. (Round answers to 0 decimal places, e.g. 2,125.) Assume that Linton uses the straight-line method. Prepare the journal entry to record 2014 depreciation. (Credit account titles are automatically indented when amount is entered. Do not indent manually.) Assume that Linton uses the straight-line method. Show how the truck would be reported in the December 31, 2014, balance sheet.

Explanation / Answer

Depreciation expense per mile = (Cost of the truck - Salvage value)/ Expected number of miles

= (30800-1700)/108000 = $0.2694 per mile.

Depreciation expense under straight line method.

Depreciaiton expense = (30800-1700)/10 = $2,910.

Therefore, the depreciation expense under straight line method is $2,910 for 2014 and 2015 as well.

Depreciation expense under units of activity method:

2014:

Depreciation expense = Depreciation rate per mile * Number of miles

=0.26944*14100 = $3,799.

2015:

Depreciation expense = Depreciation rate per mile * Number of miles

=0.26944*13000 = $3,503.

Depreciation expense under double declining method.

Under Double Decline Balance method of depreciation

Depreciation expenses in year 2014 = (2/useful life in years)*(truck cost – Accumulated Depreciation)

Depreciation expenses in year 2014 = (2/10)*(30800 - 0) = $6160

Depreciation expenses in year 2015 = (2/10)*(30800 - 6160) = $4928

Date Account Title Debit($) Credit($) 31-12-2014 Depreciation expense 2910             Accumulated depreciation 2910 To record the depreciation expense for the year 2014

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