Iverson Company purchased a delivery truck for $48,000 on January 1. 2015 The tr

Question

Iverson Company purchased a delivery truck for $48,000 on January 1. 2015 The truck was assigned an estimated useful life of 5 years and has a salvage value of S8.000 Calculate depreciation expense for 2015 using the straight-line method Compute depreciation expense using the double-declining-balance method for the years 2015 and 2016,000 - f,000 On January 1, 2015. Petersen Enterprises purchased natural resources for $2,400,000 The company expects the resources to produce 4.800.000 units of product. What is the depletion cost per unit? If the company mined and sold 400.000 units in January, what is depletion expense for the month? If some units of product are not sold at the end of the month, what account shows the cost?

Explanation / Answer

1 a) Depreciation expenses for 2015 using straight line method =

(Purchase Price - Salvage value) / useful life = ($48000 - $8000) / 5 = $8000

1 b) Rate under straight line method = 20% ($8000 / ($48000 - $8000)

under double declining method rate is doubled to 40%, Depreciation for 2015 = $40000*40% = $16000; and depreciation for 2016 = balance value * 40% = ($40000 - $16000) $24000 * 40% = $9600

2 a) Depletion cost per unit = @2400000 / 4800000 = $0.5

2 b) Depletion expense for january month = 400000units * $0.5 = $200000

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