Question

Please give an example of the plant asset your business owns. Choose the MOST appropriate depreciation method from the three different depreciation methods for plant assets: 1. Straight-line method; 2. Units-of-production method; and 3. Double-declining-balance method. (You just need to use ONE method), and calculate the depreciation for Year 1.

For example. I have a truck that I use to deliver catering. Please follow my example, and write down all these 3 steps. Thank you!

Step 1: Truck

Step 2: Units-of-Production Method

Step 3: My truck which worths $41,000 is estimated to be driven 20,000 miles for the first year, 30,000 the second, 25,000 the third, 15,000 the fourth, and 10,000 during the fifth (for a total useful life of 100,000 miles.) The residual value will be $1,000.

Depreciation per unit= ($41,000- $1,000)/1000,000 miles= $0.40 per mile

Units-of-production depreciation= $0.40 per mile * 20,000 miles= $8000 (year 1)

Date	Accounts and Explanation	Debit	Credit
Dec. 31	Deprecation Expense- Truck	8,000
	Accumulated Deprecation- Truck		8,000
	To record deprecation on truck.

Answer 1

Straight Line
Date	Cost of asset	Depreciable cost	Useful life	Depreciation expenses	Accumulated Depreciation	Book value
At Acquisition						$41,000
Year 1	$41,000	$40,000	5 Years	$8,000	$8,000	$33,000
Year 2	$41,000	$40,000	5 Years	$8,000	$16,000	$25,000
Year 3	$41,000	$40,000	5 Years	$8,000	$24,000	$17,000
Year 4	$41,000	$40,000	5 Years	$8,000	$32,000	$9,000
Year 5	$41,000	$40,000	5 Years	$8,000	$40,000	$1,000
Date	Account and explanation	Debit	Credit
Dec-31	Depreciation expenses-Truck	$8,000
	Accumulated Depreciation-Truck		$8,000
Units of production
Date	Cost of asset	Depreciation per mile	No. of miles	Depreciation expenses	Accumulated Depreciation	Book value
At Acquisition						$41,000
Year 1	$41,000	$0.40	20000	$8,000	$8,000	$33,000
Year 2	$41,000	$0.40	30000	$12,000	$20,000	$21,000
Year 3	$41,000	$0.40	25000	$10,000	$30,000	$11,000
Year 4	$41,000	$0.40	15000	$6,000	$36,000	$5,000
Year 5	$41,000	$0.40	10000	$4,000	$40,000	$1,000
Date	Account and explanation	Debit	Credit
Dec-31	Depreciation expenses-Truck	$8,000
	Accumulated Depreciation-Truck		$8,000
Double Declining balance
Date	Cost of asset	Book Value	DDB Rate	Depreciation expenses	Accumulated Depreciation	Book value
At Acquisition						$41,000
Year 1	$41,000	$41,000	40.00%	$16,400	$16,400	$24,600
Year 2	$41,000	$24,600	40.00%	$9,840	$26,240	$14,760
Year 3	$41,000	$14,760	40.00%	$5,904	$32,144	$8,856
Year 4	$41,000	$8,856	40.00%	$3,542	$35,686	$5,314
Year 5	$41,000	$5,314	40.00%	$2,125	$37,812	$3,188
Date	Account and explanation	Debit	Credit
Dec-31	Depreciation expenses-Truck	$16,400
	Accumulated Depreciation-Truck		$16,400