Chapter 10, Problem 4BTN

To determine

Concept Introduction:

Straight line method of depreciation:

This is one of the methods to calculate the depreciation on assets. Under this method the depreciable value of asset it divided equally for each year f its estimated life. The formula to calculate the deprecation under straight line method is as follows:

  $AnnualStraightlinedepreciation=\frac{\left(Cost-SalvageValue\right)}{Estimatedlifeinyears}$

Requirement-1:

To Calculate:

The annual depreciation expense using the straight line depreciation method

Answer to Problem 4BTN

The annual depreciation expense using the straight line depreciation method is $10,500

Explanation of Solution

The annual depreciation expense using the straight line depreciation method is calculated as follows;

  $AnnualStraightlinedepreciation=\frac{\left(Cost-SalvageValue\right)}{Estimatedlifeinyears}$

= (44000-2000)/4

= $10,500

To determine

Concept Introduction:

Straight line method of depreciation:

This is one of the methods to calculate the depreciation on assets. Under this method the depreciable value of asset it divided equally for each year f its estimated life. The formula to calculate the deprecation under straight line method is as follows:

  $AnnualStraightlinedepreciation=\frac{\left(Cost-SalvageValue\right)}{Estimatedlifeinyears}$

Requirement-2:

To indicate:

The recording of the annual depreciation expense using the straight line depreciation method

Answer to Problem 4BTN

The recording of the annual depreciation expense using the straight line depreciation method is as follows:

Account title         Debit     Credit

Depreciation Expense-Van      $10,500

Accumulated depreciation- Van          $10,500

(Being depreciation expense recorded)

Explanation of Solution

The annual depreciation expense using the straight line depreciation method is calculated as follows;

  $AnnualStraightlinedepreciation=\frac{\left(Cost-SalvageValue\right)}{Estimatedlifeinyears}$

= (44000-2000)/4

= $10,500

The recording of the annual depreciation expense using the straight line depreciation method is as follows:

Account title        Debit     Credit

Depreciation Expense-Van       $10,500

Accumulated depreciation- Van         $10,500

(Being depreciation expense recorded)

To determine

Concept Introduction:

Straight line method of depreciation:

This is one of the methods to calculate the depreciation on assets. Under this method the depreciable value of asset it divided equally for each year f its estimated life. The formula to calculate the deprecation under straight line method is as follows:

  $AnnualStraightlinedepreciation=\frac{\left(Cost-SalvageValue\right)}{Estimatedlifeinyears}$

Requirement-3:

To indicate:

The impact of the straight line method on the income over the life of the asset

Answer to Problem 4BTN

Straight line method of depreciation affects the net income equally for each year over the life of the asset.

Explanation of Solution

Straight line method of depreciation:

This is one of the methods to calculate the depreciation on assets. Under this method the depreciable value of asset it divided equally for each year f its estimated life. The formula to calculate the deprecation under straight line method is as follows:

  $AnnualStraightlinedepreciation=\frac{\left(Cost-SalvageValue\right)}{Estimatedlifeinyears}$

The depreciation expense amount remain same under the Straight line method of depreciation, hence it affects the net income equally for each year over the life of the asset.

To determine

Concept Introduction:

Straight line method of depreciation:

This is one of the methods to calculate the depreciation on assets. Under this method the depreciable value of asset it divided equally for each year f its estimated life. The formula to calculate the deprecation under straight line method is as follows:

  $AnnualStraightlinedepreciation=\frac{\left(Cost-SalvageValue\right)}{Estimatedlifeinyears}$

Requirement-4:

To indicate:

The book value of the asset for each year of its life using the straight line method of the depreciation and reporting for one year

Answer to Problem 4BTN

The book value of the asset for each year of its life using the straight line method of the depreciation is as follows:

Year	Ending Book value
1	$ 33,500
2	$ 23,000
3	$ 12,500
4	$2,000

The reporting for the first year in the balance sheet shall be as follows:

Property, Plant and Equipment:

Van

$44,000

Less Accumulated depreciation −Van

-$10,500

Net Book value

$33,500

Explanation of Solution

The book value of the asset for each year of its life using the straight line method of the depreciation is calculated as follows:

Year	Cost of the asset	Depreciation expense	Accumulated Depreciation	Ending Book value
	A	B	C	D =A-C
1	$ 44,000	$10,500	$ 10,500	$ 33,500
2	$ 44,000	$10,500	$ 21,000	$ 23,000
3	$ 44,000	$10,500	$ 31,500	$ 12,500
4	$ 44,000	$10,500	$ 42,000	$2,000

The reporting for the first year in the balance sheet shall be as follows:

Property, Plant and Equipment:

Van          $44,000

Less Accumulated depreciation −Van    -$10,500

Net Book value           $33,500