Depreciation for Partial Periods Malone Delivery Company purchased a new delivery truck for $43,800 on April 1, 2016. The truck is expected to have a service life of 10 years or 159,600 miles and a residual value of $5,760. The truck was driven 9,200 miles in 2016 and 12,000 miles in 2017. Malone computes depreciation to the nearest whole month. Required: 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. Straight-line method 2016 $ 2,853 2017 $ 3,804 Sum-of-the-years'-digits method 2016 ????? 2017 $ 6,398 Double-declining-balance method 2016 $ 6,570 2017 $ 7,446 Activity method 2016 $ 2,208 2017 $ 2,880 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.) Straight-line method 2016 $ 40,947 2017 $ 37,143 Sum-of-the-years'-digits method 2016 ?????? 2017 ?????? Double-declining-balance method 2016 $ 37,230 2017 $ 29,784 Activity method 2016 $41,592 2017 $ 38,712 The book value of the asset in the early years of the asset's service will be lower under an accelerated method as compared to the straight-line method. The activity method is appropriate when the service life of the asset is affected primarily by the amount the asset is used.
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.
Malone Delivery Company purchased a new delivery truck for $43,800 on April 1, 2016. The truck is expected to have a service life of 10 years or 159,600 miles and a residual value of $5,760. The truck was driven 9,200 miles in 2016 and 12,000 miles in 2017. Malone computes depreciation to the nearest whole month.
Required:
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.
Straight-line method
2016 $ 2,853
2017 $ 3,804
Sum-of-the-years'-digits method
2016 ?????
2017 $ 6,398
Double-declining-balance method
2016 $ 6,570
2017 $ 7,446
Activity method
2016 $ 2,208
2017 $ 2,880
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.)
Straight-line method
2016 $ 40,947
2017 $ 37,143
Sum-of-the-years'-digits method
2016 ??????
2017 ??????
Double-declining-balance method
2016 $ 37,230
2017 $ 29,784
Activity method
2016 $41,592
2017 $ 38,712
The book value of the asset in the early years of the asset's service will be lower under an accelerated method as compared to the straight-line method. The activity method is appropriate when the service life of the asset is affected primarily by the amount the asset is used.
Depreciation is the amortization of value of the fixed assets over the period of the asset’s useful life.
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