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.
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.
Related questions
On January 1, 2016, the AlleghenyCorporation purchased machinery for $156,000. The estimated servicelife of the machinery is 10 years and the estimated residual valueis $13,000. The machine is expected to produce 220,000 units duringits life.
| Required: |
| Calculate depreciation for 2016 and 2017 using each of thefollowing methods. (Do not round intermediatecalculations.)
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| 5. | Units of production (units produced in 2016, 46,000; unitsproduced in 2017, 41,000). (Round "Depreciation per unitrate" answers to 2 decimal places.)
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On January 22â, 2016â,TrustyDelivery Service purchased a truckat a cost of $67,000.Before placing the truck inâservice,Trustyspent $2,200
paintingâ it,$1,800 replacing âtires, and $3,700 overhauling theengine. The truck should remain in service for five years and havea residual value of $5,100.Theâ truck's annual mileage is expectedto be 20,000 miles in each of the first four years and 12,800 milesin the fifth yearlong 92,800 miles in total. In deciding whichdepreciation method toâ use,Jacob Nealyâ,the generalâ manager,requests a depreciation schedule for each of the depreciationmethodsâ (straight-line, units-of-production, andâdouble-declining-balance).
Requirement 1. Prepare a depreciation schedulefor each depreciationâ method, showing assetâ cost, depreciationâexpense, accumulatedâ depreciation, and asset book value.
Begin by preparing a depreciation schedule using theâstraight-line method.
Straight-Line Depreciation Schedule | ||||||||
Depreciation for the Year | ||||||||
Asset | Depreciable | Depreciation | Depreciation | Accumulated | Book | |||
Date | Cost | Cost | Rate | Expense | Depreciation | Value | ||
1-2-2016 | ||||||||
12-31-2016 | / | = | ||||||
12-31-2017 | / | = | ||||||
12-31-2018 | / | = | ||||||
12-31-2019 | / | = | ||||||
12-31-2020 | / | = | ||||||
Before completing theâ units-of-production depreciationâschedule, calculate the depreciation expense per unit. â(Rounddepreciation expense per unit to two decimalâplaces.)
( | - | ) / | = | Depreciation per unit | |||
( | - | ) / | = |
Prepare a depreciation schedule using theâ units-of-productionmethod. â(Enter the depreciation per unit to two decimalâ places,$X.XX.)
Units-of-Production Depreciation Schedule | ||||||||
Depreciation for the Year | ||||||||
Asset | Depreciation | Number of | Depreciation | Accumulated | Book | |||
Date | Cost | Per Unit | Units | Expense | Depreciation | Value | ||
1-2-2016 | ||||||||
12-31-2016 | x | = | ||||||
12-31-2017 | x | = | ||||||
12-31-2018 | x | = | ||||||
12-31-2019 | x | = | ||||||
12-31-2020 | x | = | ||||||
Prepare a depreciation schedule using theâdouble-declining-balance (DDB) method. â(Round depreciation expenseto the nearest wholeâ dollar.)
Double-Declining-Balance DepreciationSchedule | ||||||||
Depreciation for the Year | ||||||||
Asset | Book | DDB | Depreciation | Accumulated | Book | |||
Date | Cost | Value | Rate | Expense | Depreciation | Value | ||
1-2-2016 | ||||||||
12-31-2016 | x | = | ||||||
12-31-2017 | x | = | ||||||
12-31-2018 | x | = | ||||||
12-31-2019 | x | = | ||||||
12-31-2020 | ||||||||
Requirement 2.ââ
Trusty prepares financial statements using the depreciationmethod that reports the highest net income in the early years ofasset use. Consider the first year that Trusty uses the truck.Identify the depreciation method that meets theâ company'sobjectives.The depreciation method that reports the highest netincome in the first year is the _____________________ method. Itproduces theâ¼
highest
lowest
depreciation expense and therefore the highest net income.
Depreciation for Partial Periods
Clifford Delivery Company purchased a new delivery truck for$54,600 on April 1, 2016. The truck is expected to have a servicelife of 10 years or 109,200 miles and a residual value of $4,800.The truck was driven 11,300 miles in 2016 and 12,700 miles in 2017.Clifford computes depreciation to the nearest whole month.
Required:
Compute depreciation expense for 2016 and 2017 using the
For interim computations, carry amounts out to two decimal places.Round your final answers to the nearest dollar.
Straight-line method
| 2016 | $ |
| 2017 | $ |
Sum-of-the-years'-digits method
| 2016 | $ |
| 2017 | $ |
Double-declining-balance method
| 2016 | $ |
| 2017 | $ |
Activity method
| 2016 | $ |
| 2017 | $ |
For each method, what is the book value of the machine at theend of 2016? At the end of 2017?
(Round your answers to the nearest dollar.)
Straight-line method
| 2016 | $ |
| 2017 | $ |
Sum-of-the-years'-digits method
| 2016 | $ |
| 2017 | $ |
Double-declining-balance method
| 2016 | $ |
| 2017 | $ |
Activity method
| 2016 | $ |
| 2017 | $ |
The book value of the asset in the early years of the asset'sservice will be under an accelerated method as compared to thestraight-line method. The method is appropriate when the servicelife of the asset is affected primarily by the amount the asset isused.
