Question

Depreciation for Partial Periods Bean Delivery Company purchased a new delivery truck for $35,400 on April 1, 2016. The truck is expected to have a service life of 5 years or 157,200 miles and a residual value of $4,560. The truck was driven 9,000 miles in 2016 and 10,300 miles in 2017. Bean computes depreciation to the nearest whole month.

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

1. Straight-line method

   2016	$
   2017	$

2. Sum-of-the-years'-digits method

   2016	$
   2017	$

3. Double-declining-balance method

   2016	$
   2017	$

4. Activity method

   2016	$
   2017	$

   2. 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.)
5. Straight-line method

   2016	$
   2017	$

6. Sum-of-the-years'-digits method

   2016	$
   2017	$

7. Double-declining-balance method

   2016	$
   2017	$

8. Activity method

   2016	$
   2017	$

Answer 1

a)

Straight line Method
Cost of Truck	$     35,400
Less: Salvage value	$     (4,560)
Depreciable value	$     30,840
Depreciation per year ($30,840/5)	$        6,168
Number of months used in 2016	9 Months
Depreciation for 2016 ($6,168/12*9)	$        4,626
Depreciation for 2017	$        6,168

b)

Activity Based Method (Units of output)
Cost of Truck	$ 35,400
Less: Salvage value	$ (4,560)
Depreciable value	$ 30,840
Total expected miles	157,200
Depreciation per mile (30,840/157,200)	$      0.20
Depreciation for 2016 (9,000*$0.20)	$    1,800
Depreciation for 2017 (10,300*$0.20)	$    2,060

c)

Depreciation under DDB Method
Year - a	Net Book value, beginning of year - b	Double declained depreciation - c = b/Life of assets*2	Net book value, End of the year - d = b-c
2016	$ 35,400	$35,400/5*2*9/12 = $10,620	$      24,780
2017	$ 24,780	$                                             9,912	$      14,868

d)

Year	Cost of the assets	Salvage value	Depreciable value	sum of the year	2016 Depreciation	2017 Depreciation
2016	$                   35,400	$              4,560	$                     30,840	1+2+3+4+5 = 15	$30,840*(5/15) * (9 /12) = $7,710	$30,840*(5/15) * (3 /12) = $2,570
2017	$                   35,400	$              4,560	$                     30,840	1+2+3+4+5 = 15		$30,840*(4/15) * (9 /12) = $6,168
Depreciation expenses					7710	8738

e)

Year	Book Value
2016 ($35,400-$4,626)	$      30,774
2017 ($30,774-$6,168)	$      24,606

f)

Year	Book Value
2016 ($35,400-$1,800)	$      33,600
2017 ($33,600-2,060)	$      31,540

g)

Net book value, End of the year - d = b-c

$                           24,780

$                           14,868

h)

Year	Depreciation expense	Book Value
2016	7710	27690
2017	8738	18952

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