Floppy Company purchased a refrigerated delivery truck for $65,000 on April 1, 2

Question

Floppy Company purchased a refrigerated delivery truck for $65,000 on April 1, 2016.

The plan is to use the truck for 5 years and then replace it. At the end of its useful life the

truck is expected to have a salvage value of $10,000.

a. Prepare the depreciation table for Floppy’s truck assuming that the company

uses the straight-line method for depreciation.

b. Prepare the depreciation table for Floppy’s truck assuming that the company

uses the double-declining-balance depreciation method.

c. Compute the depreciation expense for 2016 for Floppy’s truck assuming the

truck has an expected life of 200,000 miles and during 2016 the truck was driven

24,540 miles. Round your depreciation expense per mile to three decimal places.

Explanation / Answer

a)

c) Depreciation = (24540 miles/ 200000 miles) * (Cost of Asset- Salvage Value)

= $ 6749

Straight Line Depreciation Method Year Balance before Depreciation Deprection accumulated Deprection Balance after depreciation 2016 $65,000 $8,250 $8,250 $56,750 2017 $56,750 $11,000 $19,250 $45,750 2018 $45,750 $11,000 $30,250 $34,750 2019 $34,750 $11,000 $41,250 $23,750 2020 $23,750 $11,000 $52,250 $12,750 b) Double Declining Depreciation Method Year Balance before Depreciation Deprection accumulated Deprection Balance after depreciation 2016 $65,000 $19,500 $19,500 $45,500 2017 $45,500 $18,200 $37,700 $27,300 2018 $27,300 $10,920 $48,620 $16,380 2019 $16,380 $6,552 $55,172 $9,828 2020 $9,828 $3,931 $59,103 $5,897

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