1.) Carrie Heffernan Company purchased a delivery van on January 1, 2016, for $5
ID: 2555795 • Letter: 1
Question
1.) Carrie Heffernan Company purchased a delivery van on January 1, 2016, for $50,000. The van was expected to remain in service 4 years (or 100,000 miles) and has a residual value of $5,000. The van traveled 30,000 miles the first year, 25,000 miles the second year, and 22,500 miles in the third and fourth years. Required: 1. Prepare a schedule of depreciation expense per year for the first four years of the asset's life using the (a) straight-line method, (b) units-of-production method, and (c) double-declining-balance method. 2. Prepare a schedule of the book value of the van for each of the four years using the (a) straight-line method, (b) units-of-production method and (c) double-declining-balance method.Explanation / Answer
1.
Cost = 50,000
Useful life = 4 years
Residual value = 5,000
(a)
Depreciation under Straight line method = (Cost - Residual value) / Useful life
= (50,000 - 5,000) / 4
= 11,250
(b)
Depreciation under Units of production method = (Cost - Residual value) * Miles this year / Total expected miles
(c)
Depreciation under Double declining balance method = (Cost - Accumulated depreciation) / useful life * 2
(*) Under Double declining balance method, depreciation cannot be made below the salavge value.
Depreciation in year 4 = 45,000 - 25,000 - 12,500 - 6,250 = 1,250
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2.
(a)
Straight line method
(b)
Units of production method
(c)
Double declining balance method
Year Depreciation expense 1 11,250 2 11,250 3 11,250 4 11,250Related Questions
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