Expert Q&A; Done Part 1 Prepare a depreciation schedule showing depr. exp., accu

Question

Expert Q&A; Done Part 1 Prepare a depreciation schedule showing depr. exp., accumulated depreciation and ending book value, year-by-year 3 schedules for the 3 methods: straight-line, units-of- production, double declining basis. Asset is a delivery Truck Est. Life. Orig. Cost Basis24,500.00 Est. Residual Value Est. total mileage 100,000 miles driven, Y 22,500 miles driven, Yr 2 20,100 miles driven, Yr3 18,900 miles driven, Yr 4 23,400 miles driven, Yr 5 5,100 5 2,500.00 Part 2 Assuming the truck is sold at the end of yr. 3, give the gen.journal entry to record the sale (straight-line method) assume it was sold for 8,500.00

Explanation / Answer

Part 1: Depreciation under SLM: Original Cost of Asset $24,500 Estimated Residual Value $2,500 Estimated Life 5 years Depreciable amount = Original cost-Residual value    ( 24,500 - 2,500 ) = $ 22,000 Annual Depreciation = Depreciable amount/ Estimated Life                  ( 22,000 / 5) = $ 4,400 SCHEDULE SHOWING DEPRECIATION ON SLM BASIS Year Book Value in the Beginning Depreciation Expense Acc. Depreciation Book Value at the end 1 24,500 4,400 4,400 20100 2 20100 4,400 8,800 15700 3 15,700 4,400 13,200 11,300 4 11,300 4,400 17,600 6900 5 6,900 4,400 22,000 2,500 Depreciation Under Units of Production: Depreciable amount (as computed above) $22,000 Total Mileage estimated 100,000 miles Depreciation per Miles ( Depreciable amount/Total Mileage) = 22,000 /100,000 = 0.22 per mile Depreciation each year: Year 1 (22,500 miles@0.22) 4950 Year 2 (20,100 miles@0.22) 4422 Year 3 (18,900 miles@0.22) 4158 Year 4 (23,400 miles@0.22) 5148 Year 5 (15,100 miles@0.22) 3322 SCHEDULE SHOWING DEPRECIATION ON Units of Production BASIS Year Book Value in the Beginning Depreciation Expense Acc. Depreciation Book Value at the end 1 24,500 4,950 4,950 19550 2 20100 4,422 9,372 15128 3 15,700 4,158 13,530 10,970 4 11,300 5,148 18,678 5822 5 6,900 3,322 22,000 2,500 Depreciation under Double Declining Method: Annual Depreciation under SLM = $ 4,400 Depreciable Amount under SLM = $ 22,000 Rate under SLM (Annual Depreciation / Depreciable amount) = 4400 /22,000*100 = 20% Therefore, Rate of Depreciation under Double declining Method =20%*2 =40% SCHEDULE SHOWING DEPRECIATION ON Units of Production BASIS Year Book Value in the Beginning Depreciation Expense Acc. Depreciation Book Value at the end (@40% of book Value) 1 24,500 9,800 9,800 14700 2 14700 5,880 15,680 8820 3 8,820 3,528 19,208 5,292 4 5,292 2,117 21,325 3175 5 3,175 675 22,000 2,500 (Balancing Figure) Part 2: UNDER SLM: Book value of Assets at the end of Year 3:   $ 11,300 Less: Sale value of Assets:                                 $ 8,500 Loss on disposal of assets:                                $ 2,800 JOURNAL ENTRY: Dr in $ Cr in $ Accumulated Depreciation Dr. 13,200 Loss on Disposal of Asset Dr. 2,800 Cash Account Dr. 8,500 Assets cr. 24,500

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