On January 1, 2013, the Excel Delivery Company purchased a delivery van for $48,
ID: 2418226 • Letter: O
Question
On January 1, 2013, the Excel Delivery Company purchased a delivery van for $48,000. At the end of its five-year service life, it is estimated that the van will be worth $3,000. During the five-year period, the company expects to drive the van 150,000 miles.Calculate annual depreciation for the five-year life of the van using each of the following methods. (Do not round intermediate calculations.)
Sum of the years digits for 2013 thru 2017
Double Decling Balance for same years 2013-2017
Units of production using miles driven as a measure of output, and the following actual mileage: for 2013 through 2017
Year 2013 Miles 37000 depreciation ?
Year 2014 Miles 39000 depreciation ?
2015 Miles 30000 depreciation ?
2016 Miles 35000 depreciation ?
2017 Miles 36000 depreciation ?
Units of production using miles driven as a measure of output, and the following actual mileage: for 2013 through 2017
Year 2013 Miles 37000 depreciation ?
Year 2014 Miles 39000 depreciation ?
2015 Miles 30000 depreciation ?
2016 Miles 35000 depreciation ?
2017 Miles 36000 depreciation ?
Explanation / Answer
1.
Sum of the year digits method:-
Life of the assets = 5 years
Sum of the digits of years = 1+2+3+4+5=15
Calculation of depreciation:-
Years
Remaining life at beginning of year (A)
Sum of year digits (B)
Applicable % c=(A/B)
Cost - salvage value (d)
Depreciation (c*d)
2013
5
15
33%
45000
15000
2014
4
15
27%
45000
12000
2015
3
15
20%
45000
9000
2016
2
15
13%
45000
6000
2017
1
15
7%
45000
3000
2. Double decline balace:-
Straight line depreciation rate = ((cost – salvage value)/life)/48000
= ((48000-3000)/5)/48000
= 9000/48000
= 20%
Or
= 100/life
= 100/5
=20%
Double decline balance % = 20*2 = 40%
Years
Bet book value at start of year (A)
Depreciation % (B)
Depreciation (C ) = (A*B)
A-C
2013
48000
40%
19200
28800
2014
28800
40%
11520
17280
2015
17280
40%
6912
10368
2016
10368
40%
4147
6221
2017
6220.8
40%
3220.8
3000
Salvage value
3. Unit of production:-
Years
Cost - salvage value (A)
Miles drive (B)
Life in miles (C )
Depreciation = (A)*(B)/(C )
2013
45000
37000
150000
11100
2014
45000
39000
150000
11700
2015
45000
30000
150000
9000
2016
45000
35000
150000
10500
2017
45000
36000
150000
2700
Years
Remaining life at beginning of year (A)
Sum of year digits (B)
Applicable % c=(A/B)
Cost - salvage value (d)
Depreciation (c*d)
2013
5
15
33%
45000
15000
2014
4
15
27%
45000
12000
2015
3
15
20%
45000
9000
2016
2
15
13%
45000
6000
2017
1
15
7%
45000
3000
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