Question

Brief Exercise 9-6 a-b Cullumber Ltd. purchased a delivery truck on January 1, 2018, at a cost of $77,120. The truck is expected to have a residual value of $8,210 at the end of its 4-year useful life. Cullumber has a December 31 year end. Use the diminishing-balance method and assume the depreciation rate is equal to double the straight-line rate. x Your answer is incorrect. Try again. Calculate the depreciation for each year of the truck's life. (Round answers to o decimal places, e.g. 5,275.) Depreciation expense 2018 2019 xxxx 2020 2021 LINK TO TEXT x your answer is incorrect. Try again. Calculate the depreciation In total over the truck's life. Total depreciation expense

Answer 1

ANSWER

(a)-Depreciation for each year of the truck’s life.

Depreciation expense under diminishing-balance method = Beginning Balance x 2 x Straight Line Depreciation Rate

Straight Line Depreciation Rate = [1 / Useful life]

= [1 / 4 Years]

= 0.25

Depreciation expense for 2018 = $77,120 x 2 x 0.25

= $38,560

Depreciation expense for 2019 = [$77,120 - $38,560] x 2 x 0.25

= $19,280

Depreciation expense for 2020 = [$77,120 - $38,560- $19,280] x 2 x 0.25

= $9,640

Depreciation expense for 2021 = Beginning value of the asset at the end of 3^rd year – Salvage value

= [$77,120 - $38,560- $19,280- $9,640] - $8,210

= $9,640- $8,210

= $1,430

(b)-The total depreciation over the truck’s life.

The total depreciation over the truck’s life = Depreciation expense for 2018 + Depreciation expense for 2019 + Depreciation expense for 2020 + Depreciation expense for 2021

= $38,560+ $19,280+ $9,640+ $1,430

= $68,910

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