Kleener Co. acquired a new delivery truck at the beginning of its current fiscal

Question

Kleener Co. acquired a new delivery truck at the beginning of its current fiscal year. The truck cost $23,000 and has an estimated useful life of four years and an estimated salvage value of $4,200.

a-1. Calculate depreciation expense for each year of the truck’s life using Straight-line depreciation.

a-2. Calculate depreciation expense for each year of the truck’s life using Double-declining-balance depreciation. - 4 years

b. Calculate the truck's net book value at the end of its third year of use under each depreciation method. -- single line depreciation and double declining balance depreciation

Explanation / Answer

a-1 and a-2 Depreciation by Straight line method and Diminishing balance method is as computed below:

b.

Net book value of asset is:

Depreciation Schedule Straight Line Method Cost Annual Dep. Acc. Dep. Carrying value Year of purchase 23,000 - - 23,000 1 23,000 (23,000-4,200)4 4,700 4700 18,300 2 23,000 (23,000-4,200)4 4,700 9400 13,600 3 23,000 (23,000-4,200)4 4,700 14100 8,900 4 23,000 (23,000-4,200)4 4,700 18,800 4,200 Depreciation Schedule Double-Declining Balance method Cost Annual Dep. Acc. Dep. Carrying value Year of purchase 23,000 - - - 23,000 1 23,000 (50% of $23,000) 11500 11500 11,500 2 23,000 (50% of 11,500) 5750 17250 5,750 3 23,000 (50% of 5,7500) 1550 18800 4,200 4 23,000 0

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