Question

Depreciation for Partial Periods Norman Delivery Company purchased a new delivery truck for $66,600 on April 1, 2016. The truck is expected to have a service life of 5 years or 108,000 miles and a residual value of $5,520. The truck was driven 9,300 miles in 2016 and 11,200 miles in 2017. Norman computes depreciation to the nearest whole month.

Required: Compute depreciation expense for 2016 and 2017 using the For interim computations, carry amounts out to two decimal places. Round your final answer to the nearest dollar.

Straight-line method

2016 $

2017 $

Sum-of-the-years'-digits method

2016

2017

Double-declining-balance method

2016

2017

Activity method

2016

2017

For each method, what is the book value of the machine at the end of 2016? At the end of 2017? (Round your answers to the nearest dollar.)

Straight-line method

2016

2017

Sum-of-the-years'-digits method

2016 2017

Double-declining-balance method

2016

2017

Activity method

2016

2017

Answer 1

Depreciable cost = Cost - Residual value = $66600 - $5520 = $61080

Depreciation expense:

Straight-line method

2016: $61080 x 1/5 x 9/12 = $9162

2017: $61080 x 1/5 = $12216

Sum-of-the-years'-digits method

Sum-of-the-years'-digits = 1 + 2 + 3 + 4 + 5 = 15

2016: $61080 x 5/15 x 9/12 = $15270

2017: ($61080 x 5/15 x 3/12) + ($61080 x 4/15 x 9/12) = $5090 + $12216 = $17306

Double-declining-balance method

Straight-line depreciation rate = 100%/5 years = 20%

Double-declining-balance depreciation rate = 2 x 20% = 40%

2016: 40% x $66600 x 9/12 = $19980

2017: 40% x ($66600 - $19980) = 40% x $46620 = $18648

Activity method

Depreciation per mile = $61080/108000 miles = $0.57 per mile

2016: 9300 x $0.57 = $5301

2017: 11200 x $0.57 = $6384

Book value:

Straight-line method

2016: $66600 - $9162 = $57438

2017: $57438 - $12216 = $45222

Sum-of-the-years'-digits method

2016: $66600 - $15270 = $51330

2017: $51330 - $17306 = $34024

Double-declining-balance method

2016: $66600 - $19980 = $46620

2017: $46620 - 18648 = $27972

Activity method

2016: $66600 - $5301 = $61299

2017: $61299 - $6384 = $54915