Question

Exercise 9-7 Linton Company purchased a delivery truck for $30,000 on January 1, 2017. The truck has an expected salvage value of $2,600, and is expected to be driven 102,000 miles over its estimated useful life of 10 years. Actual miles driven were 12,000 in 2017 and 12,000 in 2018. Calculate depredation expense per mile under units-of-activity method. (Round answer to 2 declmal place e.g. 0.52.) Depreciation expense per mile SHOW LIST OF ACCOUNTS LINK TO TEXT Compute depreciation expense for 2017 and 2018 using (1) the straight-line method, (2) the units-of-activity method, and (3) the double-declining-balance method. (Round depreciation cost per unit to 2 decimal places, e.g. 0.50 and depreciation rate to o decimal places, e.g. 15%. Round final answers to 0 decimal places, e.g. 2,125.) Depreciation Expense 2018 2017 (1) Straight-line method (2) Units-of-activity method $ (3) Double-declining-balance method

Answer 1

Exercise 9-7:

Depreciation expense per mile : $0.27 per mile.

Solution -

Depreciation expense per mile = total depreciable value /total miles over it's useful life.

= ($30000-$2600)/102000 miles

= $27400/102000 miles

= $0.268... per mile

= $0.27 per mile

Depreciation expense for 2017 and 2018:

	2017	2018
Straight line method	$2740	$2740
Units of activity method	$3240	$3240
Double declining balance method	$6000	$4800

Solution -

Straight line method depreciation expense per year = (cost - salvage value) /useful life.

= ($30000-$2600)/10

= $27400/10

= $2740

Therefore,

Depreciation expense for 2017 = $2740

Depreciation expense for 2018 = $2740

Depreciation expense under units of activity method = depreciation per mile × total miles driven in a year.

Depreciation expense for 2017 = $0.27×12000 = $3240

Depreciation expense for 2018 = $0.27×12000 = $3240

Depreciation expense per year under double declining balance method = cost × rate of depreciation under this method.

Where,

Rate of depreciation under double declining balance method = (100/useful life) ×2

= (100/10)×2

= 10×2

= 20

That means 20%

Therefore,

Depreciation expense for 2017 = $30000×20%

= $6000

Depreciation expense for 2018 = ($30000-$6000)×20%

= $24000×20%

= $4800

Journal entry for 2017 under straight line method :

Account titles	Debit	credit
Depreciation expense	2740
To accumulated depreciation		2740
(being depreciation expense recorded

Partial balance sheet :

LINTON COMPANY
partial balance sheet for the yearended December 31st, 2017
Truck account	$30000
(-) accumulated depreciation account	($2740)
	$27260