Linton Company purchased a delivery truck for $33,000 on January 1, 2017. The tr

Question

Linton Company purchased a delivery truck for $33,000 on January 1, 2017. The truck has an expected salvage value of $2,600, and is expected to be driven 110,000 miles over its estimated useful life of 9 years. Actual miles driven were 16,700 in 2017 and 10,600 in 2018.
A) Calculate depreciation expense per mile under units-of-activity method.
B) Compute depreciation expense for 2017 and 2018 using (1) the straight-line method, (2) the units-of-activity method, and (3) the double-declining-balance method
C) Assume that Linton uses the straight-line method. Prepare the journal entry to record 2017 depreciation.
D) Assume that Linton uses the straight-line method. Show how the truck would be reported in the December 31, 2017, balance sheet. Linton Company purchased a delivery truck for $33,000 on January 1, 2017. The truck has an expected salvage value of $2,600, and is expected to be driven 110,000 miles over its estimated useful life of 9 years. Actual miles driven were 16,700 in 2017 and 10,600 in 2018.
A) Calculate depreciation expense per mile under units-of-activity method.
B) Compute depreciation expense for 2017 and 2018 using (1) the straight-line method, (2) the units-of-activity method, and (3) the double-declining-balance method
C) Assume that Linton uses the straight-line method. Prepare the journal entry to record 2017 depreciation.
D) Assume that Linton uses the straight-line method. Show how the truck would be reported in the December 31, 2017, balance sheet.
A) Calculate depreciation expense per mile under units-of-activity method.
B) Compute depreciation expense for 2017 and 2018 using (1) the straight-line method, (2) the units-of-activity method, and (3) the double-declining-balance method
C) Assume that Linton uses the straight-line method. Prepare the journal entry to record 2017 depreciation.
D) Assume that Linton uses the straight-line method. Show how the truck would be reported in the December 31, 2017, balance sheet.

Explanation / Answer

a) Calculate depreciation expense per mile under units-of-activity method.

Dep rate = (original cost-salvage value)/Expected driven miles

= (33000-2600)/110000

Dep rate = 0.28 per mile

B) Compute depreciation expense for 2017 and 2018 using (1) the straight-line method, (2) the units-of-activity method, and (3) the double-declining-balance method

Straight line dep = (33000-2600)/9 = 3378

2017 dep = 3378

2018 dep = 3378

Unit of activity method :

2017 dep = 16700*0.28 = 4676

2018 dep = 10600*0.28 = 2968

Double decline balance method :

Straight line rate = 100/9 = 11.11%

Double decline rate = 11.11*2 = 22.22%

2017 dep = (33000*22.22%) = 7333

2018 dep = (33000-7333*22.22%) = 5703

C) Assume that Linton uses the straight-line method. Prepare the journal entry to record 2017 depreciation.

D) Assume that Linton uses the straight-line method. Show how the truck would be reported in the December 31, 2017, balance sheet.

Date accounts & explanation debit credit Depreciation expenses 3378 Accumlated depreciation a/c 3378 (To record depreciation)

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