Question

Arial v 10 B Ivar Ay 32 f С H I ] 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 А В D E G Goodfellow's Flower Shoppe purchased a new delivery van on January 1st. The van cost $45,000 and is expected to have a useful life of 5 years, with a salvage value of $5,000 after that time. Calculate straight-line depreciation for each of the next five years. Cost Salvage equals Depreciable cost less Rate Rate = each period #periods x rate% Depreciation Expense Accumulated Depreciation Book Value 16 Yr 17 1 18 2 19 3 20 4 21 5 22 23 24 25 26 27 10 Asset Depreciable Cost Cost 45,000 45,000 45,000 45,000 45,000 Salvage value = $5000 Straight Line Units of Production + Calculation Mode: Automatic Workbook Statistics F1 8 sa F2 F3 3 @ 2 # 3 $ 4 % 5 6 & 7 Q W tab E R. T T Y

Answer 1

ANSWER :

DEPRECIATION UNDER STRAIGHT LINE METHOD = ( COST OF ASSET -SALVAGE VALUE ) / USEFUL LIFE OF ASSSET

= $ 45000-$ 5000 / 5

= $ 8000

RATE OF DEPRECIATION = (1 / USEFUL LIFE)*100

=1/5*100

= 20 %

YEAR	ASSET COST	DEPRECIABLE COST	X RATE %	DEPRECIATION EXPENSE	ACCUMULATED DEPRECIATION	BOOK VALUE
1	45000	40000	20	8000	8000	37000
2	45000	40000	20	8000	16000	29000
3	45000	40000	20	8000	24000	21000
4	45000	40000	20	8000	32000	13000
5	45000	40000	20	8000	40000	5000

EXPLANATION

ASSET COST Is the total cost of acquiring the asset including its purchase price,transpoortation cost ,installation cost etc.

DEPRECIABLE COST -Is the cost of asset that is to be depreciated .It is calculated by deducting salvage value from cost of an asset.

  

RATE OF DEPRECIATION -It is the rate at which asset is depreciated.

Rate of depreciation = 1/ useful life *100

DEPRECIATION EXPENSES-Is the amount deducted from the value of asset during its life time as a result of wear and tear.

Depreciation expense = cost of asset - salvage / useful life of asset

ACCUMULATED DEPRECIATION-Is the cumulative depreciation of an asset.

BOOK VALUE-Is the value of asset in book.It is calculated by deducting accumulated depreciation from the cost of the asset.

Book value = cost of asset -accumulated depreciation