Question

Malone Delivery Company purchased a new delivery truck for $54,000 on April 1, 2019. The truck is expected to have a service life of 10 years or 150,000 miles and a residual value of $3,000. The truck was driven 10,000 miles in 2019 and 20,000 miles in 2020. Malone computes depreciation expense to the nearest whole month.

Required:

1. Compute depreciation expense for 2019 and 2020 using the following methods: (Round your answers to the nearest dollar.)
   1. Straight-line method

      2019	$
      2020	$

   2. Sum-of-the-years'-digits method

      2019	$
      2020	$

   3. Double-declining-balance method

      2019	$
      2020	$

   4. Activity method

      2019	$
      2020	$

2. For each method, what is the book value of the machine at the end of 2019? At the end of 2020? (Round your answers to the nearest dollar.)
   1. Straight-line method

      2019	$
      2020	$

   2. Sum-of-the-years'-digits method

      2019	$
      2020	$

   3. Double-declining-balance method

      2019	$
      2020	$

   4. Activity method

      2019	$
      2020	$

3. Next Level The book value of the asset in the early years of the asset's service will be __________ under an accelerated method as compared to the straight-line method. The ________ method is appropriate when the service life of the asset is affected primarily by the amount the asset is used.

Answer 1

straight line Method Cost = $54,000 ) Salvage Value = ($ 3,000) Depreciable Cost = $81,000 Depreciation for 2010 $51,000 & 9 = 3,825 lo years 2020 - $57000 Loxears = 5, 100.

Sum of years digits Method In this method we will use remaining life of the asset to the total sum of the life of the assets Sum of digits of life of the asset 10+ 9 + 8 + 7 + 6 +5+4+3+2+1 - 55 So, for the fast year fraction we use = 10 So, Depreciation for the first year = $51,000 x 10 (54000- 3,000) 55 = 9273 but anet is wed only for a months in thes & Peos.

so depreciation for this year = 9273x2 = 6955 Book Value at end of the Year - 54000 - 6955 . = 17,045 Depresration for 2020 = [5,00 x 10 x 2.) 2 Sto0x200 51,000 xg the one → 2318 + 6259 -> $8577 Double - declining balance method In this method depreciation will be double the rate of depreciation in straight Une methoch it can be calculated as = 128 1 te so rate of depreciation. 2x L lo Years -20% Depreciation for 2019- $4,000 x 20%>> 8,100 225 - 45 00 320, xe9,180 (54,000–8,100)

Activity Method Depreciation will be calculated by using depreciation per unit of usage of asset. So, depreciation Rate: $ 51,000 (s4,000 - 3,000) 150,000 miles = 0.34 mile per mile Depreciation for 2019 19 - 10,000 miles 80.34 =) 3,400 20 > 20,000 milen 70-348) 6800 3.82 1. Depreciation and Book Value ② straight line Method year Depreciation Book Value 2019 3,825 50,175 (54,000-30,495) - 2020 5,100 45,075 (54,000-3825-500) Ő Sum -of - the yeax digots Method 1 Year Depreciation Book Value 2019 $ 47,045 (54,000-6955) 2020 8,577 $38, 468 (54000-6983–8577) © Double - declining balance Method Year Depreciation Bole Value 2019 8,100 $45,900 154,000 - 8,100) 9,180 $36, 720 6,955 D-8100 - 9180

@ Activity Year Method Depreciation 2019 Book Value 50, 600 (54,000 -3,401) 2,400 2020 6,800 43,800 (54,000 -3,400-6800) The book value of the asset in the early years of the asset service will be lower under an accelerated method as compared to the straight line method. The Activity Method is appropriate when the service life of the asset is affected primarily by the amount the asset is used