Question

This Question: 5 pts 1 of 2 (0 complete) It's three months before the end of the financial year and Leo Murphy, owner and operator of Murph's Trucking, has just purchased a new truck for his cattle and hay hauling business. Costs incurred are as indicated below: (Click the icon to view the costs incurred.) Leo estimates a useful life for the truck of 10 years, at which time it could be sold for $17,000, he reckons. Leo's plan, however, is to upgrade to a new model in two years. Leo estimates the resale value in two years to be $110,000. Requirements Requirement (a) Murph's straight-line depreciation expense for the current year is $ (Round to the nearest cent.) Requirement (b) Show how Murph's truck will appear on the balance sheet after 15 months use. (Round to the nearest cent.) Truck at purchase price 220000 Requirements x Costs incurred Х a) Calculate Murph's straight-line depreciation expense for the current year. b) It's now the end of the next financial year after purchase of the new truck. That is, Murph's been using his new truck for 15 months. Nothing's changed, but now Leo wants to see how his truck will be shown on his balance sheet. Show how Leo's truck will appear on the balance sheet after 15 months use. Remember that he's using straight-line depreciation. Dealer charge Installation of GPS, safety devices, etc. Delivery charges Import taxes Fuel cost (first fill-up) $ 220,000 $ 2,550 $ 2,600 $ 4,200 Print Done $ 400 Print Done

Answer 1

a) Murphys Current year straight line depreciation is = $5317.5

220000 2500 Cost of the Truck Dealers Charge Installation of Safety devices Delivery charges Import tax Fuel cost (first fill up) Total Cost of Truck 2600 4200 400 229700

229700 - 17000 212700 Calculation of Depreciation Total Cost of Truck Less salvage after 10 years Depreciable value for 10 years Straight line Yearly Depreciation = Cost of Truck-Salvage value/Life of the truck Yearly Depreciation = 229700-17000/10 Three months depreciation for the current year = Yearly Depreciation*3/12 Three months depreciation for the current year = Second year depreciation straight line 21270 5317.5 21270 Under straight line depreciation the yearly depreciation will be the same

b) The truck will be shown in the balance sheet = $203112.5

Truck Value as will be shown in the Balance Sheet Cost of the Truck 229700 Less accumulated Depreciation -26587.5 Book Value as will shown in the Balance Sheet 203112.5 5317.5 Accumulated Depreciation First year 3 months Second year depreciation Total Accumulated Depreciation 21270 26587.5