Tom's Company purchased a van at a total cost of $55,000. At theend of its useful life of 5 years, the van should have a salvagevalue of $5,000. The van is expected to be driven 100,000 milesover this time period as follows: year 1 25,000 miles, year 230,000 miles, year 3 20,000 miles, year 4 15,000 miles, and year 510,000 miles. Prepare a schedule showing the depreciation expenseand year-end carrying value of the van for each of the next twoyears under each of the following methods of depreciation:
- Straight Line
- Units-of-Production
- Double-declining-balance
Tom's Company purchased a van at a total cost of $55,000. At theend of its useful life of 5 years, the van should have a salvagevalue of $5,000. The van is expected to be driven 100,000 milesover this time period as follows: year 1 25,000 miles, year 230,000 miles, year 3 20,000 miles, year 4 15,000 miles, and year 510,000 miles. Prepare a schedule showing the depreciation expenseand year-end carrying value of the van for each of the next twoyears under each of the following methods of depreciation:
- Straight Line
- Units-of-Production
- Double-declining-balance
Related questions
On January 1, 2016, Pearson Company purchased a delivery truckfor $64,000. The van was estimated to have a 5-year useful life or100,000 miles. Salvage value was estimated at $4,000. The van wasdriven 25,000 miles in 2016 and 22,000 miles in 2017. Which of thefollowing is an incorrect statement? |
Depreciation expense for 2017 using the units-of-productionmethod is $13,200.
Depreciation expense for 2016 using the double-declining-balancemethod is $25,600.
Depreciation expense for 2017 using the double-declining-balancemethod is $14,400.
Depreciation expense for 2016 using the units-of-productionmethod is $15,000.
1)
Brady Self Storage purchasedâ land, paying $160,000 cash as a down payment and signing a $195,000
note payable for the balance. Brady also had to pay delinquent property tax of $3,000, title insurance costing $6,000, and $4,000 to level the land and remove an unwanted building.
The company paid $56,000 to add soil for the foundation and then constructed an office building at a cost of $950,000. It also paid $47,000 for a fence around theâ property, $11,000 for the company sign near the propertyâ entrance, and $10,000 for lighting of the grounds.
Requirement
1. What is the capitalized cost of each of
Bradyâ's land, landâ improvements, andâ building?
The cost of the land is
â$ .
2) West Sideâ's Pizza bought a used Toyota delivery van on Januaryâ 2, 2014, for $22,000. The van was expected to remain in service for four years left parenthesis (80,000 miles). At the end of its usefulâ life,
West Sideâ's officials estimated that theâ van's residual value would be $2,000.
The van traveled 32,000 miles the firstâ year, 28,000 miles the secondâ year, 15,000 miles the thirdâ year, and 5,000 miles in the fourth year.
Requirements
| 1. | Prepare a schedule of depreciation expense per year for the van under the three depreciation methods. |
| 2. | Which method best tracks the wear and tear on theâ van? |
| 3. | Which method would West Sideâ's prefer to use for income taxâ purposes? Explain in detail why West Sideâ's prefers this method. |
Requirement 1. Prepare a schedule of depreciation expense per year for the van under the three depreciation methods.
â(For units-of-production andâ double-declining-balance, round to the nearest two decimal places after each step of the calculation. For years withâ $0 depreciation, make sure to enterâ "0" in the appropriateâ column.)
| Year | Straight-Line |
| 2014 | |
| 2015 | |
| 2016 | |
| 2017 | |
| Total |
3)
Desmond Corp. purchased 55, $1,000, 55â% bonds of Geotherm Corporation when the market rate of interest was 14â%. Interest is paid semiannually on theâ bonds, and the bonds will mature in four years. Using the PV function in Excel â@, compute the price Desmond paidâ (the presentâ value) on the bond investment.
(Assume that all payments of interest and principal occur at the end of the period. Round your answer to the nearestâ cent.)
Desmond paid $ on the bond investment.
