Question

On January 2, 2018, Quick Delivery Service purchased a truck at a cost of $90,000. Before placing the truck in service, Quick spent $2,200 painting it, $1,700 replacing tires, and $5,100 overhauling the engine. The truck should remain in service for five years and have a residual value of $9,000. The truck's annual mileage is expected to be 21,000 miles in each of the first four years and 16,000 miles in the fifth year—100,000 miles in total. In deciding which depreciation method to use, Alec Rivera, the general manager, requests a depreciation schedule for each of the depreciation methods (straight-line, units-of-production, and double-declining-balance). Read the requirements 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. Book Value Straight-Line Depreciation Schedule Depreciation for the Year Asset Depreciable Useful Depreciation Accumulated Date Cost Cost Life Expense Depreciation 1-2-2018 99000 12-31-2018 1 12-31-2019 1 12-31-2020 / 12-31-2021 1 12-31-2022

Answer 1

Solution

		Depreciation for the year
Date	Asset Cost	Depreciable cost		useful life		Depreciation expense	Accumulated Depreciation	Book value
1/2/2018	$        99,000							$        99,000
12/31/2018		$                  90,000	/	5	=	$        18,000	$        18,000	$        81,000
12/31/2019		$                  90,000	/	5	=	$        18,000	$        36,000	$        63,000
12/31/2020		$                  90,000	/	5	=	$        18,000	$        54,000	$        45,000
12/31/2021		$                  90,000	/	5	=	$        18,000	$        72,000	$        27,000
12/31/2022		$                  90,000	/	5	=	$        18,000	$        90,000	$          9,000