Bean Delivery Company purchased a new delivery truck for $58,200 on April 1, 201

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

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 2016? At the end of 2017?
(Round your answers to the nearest dollar.)
Straight-line method

Sum-of-the-years'-digits method

Double-declining-balance method

Activity method

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.

Explanation / Answer

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

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