Question

Norman Delivery Company purchased a new delivery truck for $72,000 on April 1, 2019. The truck is expected to have a service life of 5 years or 90,000 miles and a residual value of $3,000. The truck was driven 8,000 miles in 2019 and 18,000 miles in 2020. Norman 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	$

Answer 1

$ Given A. Cost of Truck B.Expected Life C.Expected Life D. Residual Value E.Net Asset Value (A-D) 72,000 5 Years 9000 Miles 3.000 69,000 $ a) Straight Line Method Formular Cost of the Asset-Salvage Value Useful Life of the Asset Date Particulars 2019 F.Depreciation (E/B] 2019 G.Book Value of Machine (A-F) 2020 H.Depreciation 2020 1.Book Value of Machine (G-H) 13,800 58,200 13,800 44,400 Note: Under straight line depreciation is same in all the years b) Sum of the year's digit method Depreciable Asset Formula = Remaining useful life of the asset Sum of the year's digits Year Deprciation Base 69,000 69,000 69,000 69,000 69,000 Remaining Life Depreciation of asset Expense 23,000 18,400 13,800 Z 9,200 4,600 Book Value Cost. Depreciation) $ 49,000 30,600 $ 16,800 7,500 $ 3,000 Date Particulars 2019 Depreciation 2019 Book Value 2020 Depreciation 2020 Book Value Amount $ 23,000 $ 49,000 $ 18,400 $ 30,600

c) Double Declining Method Formula= 2 X Straight Line Depreciation rate X Book Value at beginning of the period Depreciation Rate (1/Useful Life) Net Book Value,beginning of year 72,000 43,200 25,920 15.552 9,331 Depreciation $ 28,800 $ 17.280 $ 10,368 6.221 $ 6,331 69,000 Net Baak Value, End of year $ 43,200 $ 25,920 $ 15,552 9,331 $ 3,000 Note last year depreciation will be the balancing figure to keep the end value equal to salvage value Date Particulars 2019 Depreciation 2019 Book Value 2020 Depreciation 2020 Book Value Amount $ 28,800 $ 43,200 17,280 $ 25.920 d) Activity Method Formula= X Actual activity performed during the period Cost - Salvage Value) Total estimated life time activity of the asset Given Estimated Miles Miles in 2019 Miles in 2020 90000 8000 18000 Date Particulars 2019 Depreciation 2019 Book Value 2020 Depreciation 2020 Book Value Amount $ 6,133 $ 65,867 13,800 $ 52,067