Kleener Co. acquired a new delivery truck at the beginning of its current fiscal

Question

Kleener Co. acquired a new delivery truck at the beginning of its current fiscal year. The truck cost $21,000 and has an estimated useful life of four years and an estimated salvage value of $4,200.

(a)

Calculate depreciation expense for each year of the truck's life using Straight-line depreciation. (Omit the "$" sign in your response.)

(b)

Calculate depreciation expense for each year of the truck's life using Double-declining-balance depreciation. (Omit the "$" sign in your response.)

Calculate the truck's net book value at the end of its third year of use under each depreciation method. (Omit the "$" sign in your response.)

Assume that Kleener Co. had no more use for the truck after the end of the third year and that at the beginning of the fourth year it had an offer from a buyer who was willing to pay $5,880 for the truck. Should the depreciation method used by Kleener Co. affect the decision to sell the truck?

SELECT ONE (YES/NO)

Explanation / Answer

Depr Expense as SLM = (26000 - 4000)/4 = 5500 % for DDL method = 5500/22000 = 25% *2 = 50% Depr Expen as per DDL Year1= 26000*.50 = 13000 Year2 = (26000 - 13000)*.50 = 6500 Year3 = (26000 - 13000 - 6500)*50 = 3250 Requirement 2 SLM = 26000 - 5500*3 = 9500 DDL = 26000 - 13000 - 6500 -3250 = 3250

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