Kleener Co. acquired a new delivery truck at the beginning of it\'s current fisc

Question

Kleener Co. acquired a new delivery truck at the beginning of it's current fiscal year. The truck cost $31,000 and has an estimated useful life of four years and an estimated salvage value of $4,100. a1. Calculate depreciation expense for each year of the truck's life using Straight-line depreciation. a-2 Calculate depreciation expense for each year of the truck's life using Double-declining-balance depreciation. b. Calculate the truck's net book value at the end of it's third year under each depreciation method

Explanation / Answer

a-1. Straight-line depreciation:

Depreciable amount = Cost - Salvage value = $ 31,000 - $ 4,100 = $ 26,900

Annual depreciation = $ 26,900 / 4 = $ 6,725

a-2. Double declining balance depreciation:

Rate of depreciation = 2 x Straight line depreciation rate = 100 / Estimated useful life x 2 = 100/ 4 x 2 = 50%

First year depreciation = $ 31,000 x 50% = $ 15,500

Second year depreciation = $ ( 31,000 - 15,500) x 50 % = 7,750

Third year depreciation = Book value of asset - Salvage value = $ 7,750 - $ 4,100 = $ 3,650

Fourth year depreciation = Nil ( As net book value has been reduced to salvage value)

b. Truck's net book value:

Straight line method:

Double declining balance method:

Year Cost Depreciation expense Net book value 1 $ 31,000 $ 6,725 $ 24,275 2 $ 6,725 $ 17,550 3 $ 6,725 $ 10,825 4 $ 6,725 $ 4,100

Related Questions

Navigate

• Browse (All)
• Browse K
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.