8. Calculate year 1 depreciation for the car purchase in #7, assuming a salvage value of $2500,a useful life of 5 years and 150,000 estimated useful life in miles - with 60,000 miles driven in year 1.Straight Line Depreciation:Declining balance depreciation:Units of Activity depreciation: 7. AB Company purchases a truck in the amount of $15,000. Additional costs include sales tax of $1500,painting of $2500, license of $150 and a 1 year auto insurance policy of $1200. Complete thejournal entry for the auto purchase.AccountDebitCreditTruck20,350Cash20,350

Name: 8. Calculate year 1 depreciation for the car purchase in #7, assuming
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Description: 8. Calculate year 1 depreciation for the car purchase in #7, assuming a salvage value of $2500,a useful life of 5 years and 150,000 estimated useful life in miles - with 60,000 miles driven in year 1.Straight Line Depreciation:Declining balance depr

Answer: Computation of Year 1 Straight line depreciation is as follows: Straight line depreciation =Cost - Salvage valueNo. of useful life=$20350 -$25005=$178505=$3570Computation of year 1 Declining balance depreciation is as follows: Depreciation = Cost ×1Useful life=$20350 ×15=$4070Computation of year 1 Units of activity depreciation: Unit of Activity Depreciation =Cost - Salvage valueTotal estimated useful life in miles×Miles driven in Year 1=$20350 -$2500150000×60000=$17850150000×60000=$7140

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Accounting

8. Calculate year 1 depreciation for the car purchase in #7, assuming a salvage value of $2500, a useful life of 5 years and 150,000 estimated useful life in miles - with 60,000 miles driven in year 1. Straight Line Depreciation: Declining balance depreciation: Units of Activity depreciation:

8. Calculate year 1 depreciation for the car purchase in #7, assuming a salvage value of $2500, a useful life of 5 years and 150,000 estimated useful life in miles - with 60,000 miles driven in year 1. Straight Line Depreciation: Declining balance depreciation: Units of Activity depreciation:

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Concept explainers

Depreciation Methods

The word "depreciation" is defined as an accounting method wherein the cost of tangible assets is spread over its useful life and it usually denotes how much of the assets value has been used up. The depreciation is usually considered as an operating expense. The main reason behind depreciation includes wear and tear of the assets, obsolescence etc.

Depreciation Accounting

In terms of accounting, with the passage of time the value of a fixed asset (like machinery, plants, furniture etc.) goes down over a specific period of time is known as depreciation. Now, the question comes in your mind, why the value of the fixed asset reduces over time.

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Question

8. Calculate year 1 depreciation for the car purchase in #7, assuming a salvage value of $2500,
a useful life of 5 years and 150,000 estimated useful life in miles - with 60,000 miles driven in year 1.
Straight Line Depreciation:
Declining balance depreciation:
Units of Activity depreciation:

7. AB Company purchases a truck in the amount of $15,000. Additional costs include sales tax of $1500,
painting of $2500, license of $150 and a 1 year auto insurance policy of $1200. Complete the
journal entry for the auto purchase.
Account
Debit
Credit
Truck
20,350
Cash
20,350

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