Spartacus Dog Company purchased a new supply van on January 1, 2011, for $40,000

Question

Spartacus Dog Company purchased a new supply van on January 1, 2011, for $40,000. The van is estimated to last for five years and will then be sold, at which time it should be worth approximately $2,000. The company uses straight-line depreciation and has a fiscal year end of December 31 Requirements 1. How much depreciation expense will be shown on the income statement for the year ended December 31, 2011? 2. What is the book value (also called carrying value) of the truck on the balance sheet for each of the five years beginning with December 31, 2011? Requirement 1. How much depreciation expense will be shown on the income statement for the year ended December 31, 2011? Select the formula to calculate depreciation expense, then enter the amounts to calculate the depreciation expense for the year ended December 31, 2011 Depreciation expense Suppose a company had the following accounts and balances at year end after all adjustments had been made (Click the icon the accounts balances listing.) Prepare the income statement for the year Prepare the income statement for the year. (Leave unused cells blank.) Company Info Income Statement For the year ended Service revenue Interest revenue Unearned revenue Operating expenses Prepaid rent $7,440 2,230 3,230 1,460 1,090 Revenues Expenses: Print Done Total expenses Net income Friendly Dog Company purchased a new supply van on January 1, 2011, for $32,000. The van is estimated to last for five years and will then be sold, at which time it should be worth approximately $3,000. The company uses straight-line depreciation and has a fiscal year end of December 31 Requirements 1. How much depreciation expense will be shown on the income statement for the year ended December 31, 2011? 2. What is the book value (also called carrying value) of the truck on the balance sheet for each of the five years beginning with December 31, 2011? Requirement 1. How much depreciation expense will be shown on the income statement for the year ended December 31, 2011? Select the formula to calculate depreciation expense, then enter the amounts to calculate the depreciation expense for the year ended December 31, 2011 Depreciation expense

Explanation / Answer

Answer

A

Cost of Van

$40000

B

(-)Salvage value

$2000

C=A-B

Depreciable base

$38000

D

Useful life (years)

5

E=C/D

Straight Line depreciation

$7600

Equation: ($40000 - $2000)/5 = $7600

Closing Book Value on Balance sheet each year

Year

Opening Book Value ($)

Depreciation expenses ($)

Closing Book Value on the balance sheet on 31 Dec ($)

2011

40000

7600

$32400

2012

32400

7600

$24800

2013

24800

7600

$17200

2014

17200

7600

$9600

2015

9600

7600

$2000

Revenues:

Service Revenue

$7440

Interest revenue

$2230

Unearned Revenue (Balance sheet item-Liability side)

Total Revenues

$9670

Expenses:

Operating expenses

$1460

Prepaid Rent (balance sheet item-Asset side)

Total expenses

$1460

Net Income

$8210

A

Cost of Van

$40000

B

(-)Salvage value

$2000

C=A-B

Depreciable base

$38000

D

Useful life (years)

5

E=C/D

Straight Line depreciation

$7600

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