Little Caesar\'s Pizza bought a used Nissan delivery van on January 1, 2010 for

Question

Little Caesar's Pizza bought a used Nissan delivery van on January 1, 2010 for $15,000. The van was expected to remain in service 4 years (100,000 miles). At the end of its useful life, its estimated residual value will be $3000. The van traveled 34,000 miles the first year, 28,000 the second year, 18,000 the third year, and 20,000 in the fourth year. Prepare a schedule of depreciation expense per year for the van under the 3 depreciation methods. Show computations Prepare a schedule of Book value after each year for all three methods. STRAIGHT LINE ACCUMULATED DEPRECIATION EXPENSE DEPRECIATION ASSET BOOK VALUE YEAR 1 YEAR 2 YEAR 3 YEAR 4 UNITS OF PRODUCTION ACCUMULATED DEPRECIATION EXPENSE DEPRECIATION ASSET BOOK VALUE YEAR 1 YEAR 2 YEAR 3 YEAR 4 DOUBLE DECLINING BALANCE ACCUMULATED DEPRECIATION EXPENSE DEPRECIATION ASSET BOOK VALUE YEAR 1 YEAR 2 YEAR 3 YEAR 4

Explanation / Answer

Straight line (15000-3000)/4 3000 Year Beg value Dep exp Acc dep Asset Book value 1 15000 3000 3000 12000 2 12000 3000 6000 9000 3 9000 3000 9000 6000 4 6000 3000 12000 3000 Unit of production method (15000-3000)/100000 0.120 Dep rate No. of miles Dep exp 1 0.120 34000 4080 2 0.120 28000 3360 3 0.120 18000 2160 4 0.120 20000 2400 Year Beg value Dep exp Acc dep Asset Book value 1 15000 4080 4080 10920 2 10920 3360 7440 7560 3 7560 2160 9600 5400 4 5400 2400 12000 3000 Double declining method DDB rate=200%*1/4 0.5 Year Beg value Dep rate Dep exp Acc dep Asset Book value 1 15000 50% 7500 7500 7500 2 7500 50% 3750 11250 3750 3 3750 50% 1875 13125 1875 4 1875 50% 937.5 14062.5 937.5

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