Question

On January 2, 2018, Reliable Delivery Service purchased a truck at a cost of $95,000. Before placing the truck in service, Reliable spent $2,500 painting it, $800 replacing tires, and $10,700 overhauling the engine. The truck should remain in service for five years and have a residual value of $10,000. The truck's annual mileage is expected to be 26,000 miles in each of the first four years and 19,750 miles in the fifth year-123,750 miles in total. In deciding which depreciation method to use. Can Thomas, the general manager, requests a depreciation schedule for each of the depreciation methods (straight-line, units-of-production, and double-declinina-balance). Requirement 1. Prepare a depreciation schedule for each depreciation method, showing asset cost. depreciation expense, accumulated depreciation and asset book value Begin by preparing a depreciation schedule using the straight-line method Straight-Line Depreciation Schedule

Answer 1

Cash price of Truck	$95,000
Cost of painting	$2,500
Cost of tires	$800
Cost of overhauling	$10,700
Total cost of truck	$109000

Residual value = $10,000

Depreciation cost = Total cost of truck - Residual value

= 109,000-10,000

= $99,000

		Depreciation for the Year
Date	Asset Cost	Depreciable Cost	/	Useful Life	=	Depreciation Expense	Accumulated Depreciation	Book Value
01-02-18	109,000		/		=			109,000
12-31-2018		99,000	/	5	=	19,800	19,800	89,200
12-31-2019		99,000	/	5	=	19,800	39,600	69,400
12-31-2020		99,000	/	5	=	19,800	59,400	49,600
12-31-2021		99,000	/	5	=	19,800	79,200	29,800
12-31-2022		99,000	/	5	=	19,800	99,000	10,000

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