Alpha Company has the following items in its equipment account: Method of Asset
ID: 2599802 • Letter: A
Question
Alpha Company has the following items in its equipment account: Method of Asset & Date Purchased Cost Salvage Value Depreciation 1. Delivery Truck (4/30/15) 2. Office Furniture (6/1/15) 3. Computer (4/1/15) Unit of Activity $60,000 $11,000 Straight Line $15,000 $500 Double Decining 5,000 $700 The delivery truck is estimated to have a life cycle of 200,000 miles. It was driven for 1. 16,500 miles in 2015& 24,600 miles in 2016 2. The Office Furniture has a life expectancy of 7 years 3. The Computer has a ufe expectancy of 4 years Round any per unit calculations to the nearest half penny. Round all annual depreciation expenses to the nearest dollar. Use this information to compute for Fiscal Year 2016 the following values: 1. Book Value of the Delivery Truck 2. Depreciation Expense- Truck 3. Book Value of the Office Furniture 4. Depreciation Expense-Office Furniture 5. Book Value of the Computer 6. Depreciation Expense- ComputerExplanation / Answer
ans)
1. Book value of the delivery truck
Depreciation Per mile = Cost - salvage value / Expected miles
= 60,000 - 11000 / 200,000
= 0.245 Per mile
Depreciation for 2015 = 16500 X 0.245 per mile = 4042.5
Book value of the delivery truck at the end of 2015 = 60,000 - 4042.5 = 55957.5
2. Depreciation expense - truck
Depreciation for 2016 = 24,600 X 0.245 per mile = 6027
3.Book value of the office furniture
Depreciation for 2015 = Cost - salvage value / estimated useful life
= 15000 - 500 / 7
= 2071
Book value at the end of 2015 = 15000 - 2071 = 12929
4.Depreciation expense - Office furniture
Under straight line method of depreciation, depreciation will be same for all years
Depreciation for 2016 = 2071
5. Book value of the computer
Depreciation rate = ( 1 / Useful life ) X 200%
= ( 1 / 4 ) X 200%
= 50%
Depreciation for 2015 = 5000 X 50% = 2500
Book value at the end of 2015 = 5000 - 2500 = 2500
6. Depreciation expense - Computer
Depreciation for 2016 = 2500 X 50% = 1250
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