Each team member is to become an expert on one depreciation method to facilitate

Question

Each team member is to become an expert on one depreciation method to facilitate teammates’ understanding of that method. Follow these procedures:

a. Each team member is to select an area for expertise from one of the following depreciation methods:

1.straight-line, 2.units-of-production, and
3. double-declining-balance.

b. Using the following data, group members are to collaborate and develop a a written presentation answering the requirements.

Data and Requirements On January 8, 2009, Mojo Riders purchases a van to transport rafters back to the point of departure at the conclusion of the rafting adventures they operate. The cost of the van is $45,000. It has an estimated salvage value of $2,600 and is expected to be used for four years and driven 68,000 miles. The van is driven 10,000 miles in 2009, 17,000 miles in 2010, 20,000 in 2011, and 11,000 in 2012.

1. Compute the annual depreciation expense for each year of the van’s estimated useful life.

2. Explain when and how annual depreciation is recorded. Prepare journal entries

3. Explain the impact on income of this depreciation method versus others over the van’s life.

4. Identify the van’s book value for each year of its life and illustrate the reporting of this amount for any one year.

5. Prepare a depreciation schedule following familiar formats from your textbook to assist you in answering the above questions.

Explanation / Answer

Mojo Riders Details Amt $ Cost Of Van               45,000 Less salvage value                  2,600 Depreciable value             42,400 Useful life in years                          4 SL depreciation per year =             10,600 DD balance depreciation % on carrying value 50% Units of production method Expected miles to be driven in 4 years             68,000 Depreciation per mile= $         0.6235           5 Depreciation Schedule Year Book Value in The beginning Miles driven Depreciation rate /mile Depreciation Expense Accumulatede Depreciation Book Value of Asset at Years end Year 2009             45,000             10,000         0.6235          6,235               6,235                  38,765 Year 2010             38,765             17,000         0.6235        10,600             16,835                  28,166 Year 2011             28,166             20,000         0.6235        12,470             29,305                  15,696 Year 2012             15,696             11,000         1.1905        13,096             42,400                    2,600 In last year the depreciation rate adjusted to reflect the salvage value as book value.           1 Annual Depreciations Year Depreciation Expense Year 2009                6,235 Year 2010             10,600 Year 2011             12,470 Year 2012             13,096           2 Annual depreciation recording is a year end closing process   and recorded at the year end. The Accounting entry is:(for 1st Year) Accumulated Depreciation Cr 6235 Depreciation Expense   Dr 6235           3 Over the total 4 years the amount of depreciation recorded will be same for all methods. In SL method it will be same each year ($10600) In DD balance it will start with $22500 in the   first year and then drastically reduce each year. In units of production it is based on actual use   and adjustement in the last year as given.           4 Van Book Values Year Book Value in The beginning Accumulatede Depreciation Book Value of Asset at Years end Year 2009             45,000               6,235         38,765 Year 2010             38,765             16,835         28,166 Year 2011             28,166             29,305         15,696 Year 2012             15,696             42,400           2,600 Im Year 2010 , The Balance sheet presentation will be like this Van Gross Amount             45,000 Less: Accumulated Depreciation           (16,835) Net Value of Van             28,166

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