Question

Depreciation Handout Excel Company purchased a delivery van on January 1, 2012 for $33,000. Management has estimated that equipment will have a useful life of five years or 100,000 hours. At the end of five years, management believes that equipment will be worth $3,000. The actual miles the van was driven is as follows: 2012 2013 2014 2015 2016 22,000 miles 24,000 miles 15,000 miles 20,000 miles 21,000 miles Straight line Depreciation Cost - Residual Value Years (Depreciable Cost) Year Depreciation Expense Accumulated Depreciation Book Value 2012 2013 2014 | 2015 2016 Journal Entries Straight line 2012 2015 2013 2016 2014

Answer 1

	Excel Company
1	Straight line method
	Annual depreciation	(Cost-Residual Value)/Years
		=(33,000-3,000)/5
		6,000
								Calculation
	Year			Depreciation expense	Accumulated Depreciation	Book Value		Book Value
	2012			6,000	6,000	27,000		=33,000-6,000
	2013			6,000	12,000	21,000		=33,000-12,000
	2014			6,000	18,000	15,000		=33,000-18,000
	2015			6,000	24,000	9,000		=33,000-24,000
	2016			6,000	30,000	3,000		=33,000-30,000
						Cost less Accumulated Depreciation

Excel Company
Date	Account	Debit	Credit
Straight line method
1-Jan-12	Delivery Van	33,000
	Cash		33,000
31-Dec-12	Depreciation expense	6,000
	Accumulated Depreciation-Delivery Van		6,000
31-Dec-13	Depreciation expense	6,000
	Accumulated Depreciation-Delivery Van		6,000
31-Dec-14	Depreciation expense	6,000
	Accumulated Depreciation-Delivery Van		6,000
31-Dec-15	Depreciation expense	6,000
	Accumulated Depreciation-Delivery Van		6,000
31-Dec-16	Depreciation expense	6,000
	Accumulated Depreciation-Delivery Van		6,000

2	Units of production method
	Dep per unit	(Cost-Residual Value)/Units of Activity
		=(33,000-3,000)/100,000
		0.30
	Year	Units	Rate	Depreciation expense	Accumulated Depreciation	Book value		Units	Depreciation expense
	2012	22,000	0.30	6,600	6,600	26,400			=22,000*0.30
	2013	24,000	0.30	7,200	13,800	19,200			=24,000*0.30
	2014	15,000	0.30	4,500	18,300	14,700			=15,000*0.30
	2015	20,000	0.30	6,000	24,300	8,700
	2016	19,000	0.30	5,700	30,000	3,000		=100,000-SUM(C20:C23)
								=100,000-22,000-24,000-15,000-20,000

Date	Account	Debit	Credit
Units of production method
1-Jan-12	Delivery Van	33,000
	Cash		33,000
31-Dec-12	Depreciation expense	6,600
	Accumulated Depreciation-Delivery Van		6,600
31-Dec-13	Depreciation expense	7,200
	Accumulated Depreciation-Delivery Van		7,200
31-Dec-14	Depreciation expense	4,500
	Accumulated Depreciation-Delivery Van		4,500
31-Dec-15	Depreciation expense	6,000
	Accumulated Depreciation-Delivery Van		6,000
31-Dec-16	Depreciation expense	5,700
	Accumulated Depreciation-Delivery Van		5,700

3	Double declining balance method
	Double declining rate	100%/Years*2
		=100%/5*2
		40%
	Year			Depreciation expense	Accumulated Depreciation	Book value		Depreciation expense
	2012			13,200	13,200	19,800		=33,000*40%
	2013			7,920	21,120	11,880		=19,800*40%
	2014			4,752	25,872	7,128		=11,880*40%
	2015			2,851	28,723	4,277		=7,128*40%
	2016			1,277	30,000	3,000		=4,277-3,000
	Note
	Last year dep of 1,277 is remaining figure to keep book value at residual value of 3,000

Double declining balance method
1-Jan-12	Delivery Van	33,000
	Cash		33,000
31-Dec-12	Depreciation expense	13,200
	Accumulated Depreciation-Delivery Van		13,200
31-Dec-13	Depreciation expense	7,920
	Accumulated Depreciation-Delivery Van		7,920
31-Dec-14	Depreciation expense	4,752
	Accumulated Depreciation-Delivery Van		4,752
31-Dec-15	Depreciation expense	2,851
	Accumulated Depreciation-Delivery Van		2,851
31-Dec-16	Depreciation expense	1,277
	Accumulated Depreciation-Delivery Van		1,277