Beckworth Company purchased a truck on January 1, 2016, at a cash cost of $10,00

Question

Beckworth Company purchased a truck on January 1, 2016, at a cash cost of $10,000. Other costs associated with the truck were delivery costs of $1,200, and taxes of $1,000 and other registration fees of $400. The estimated residual value was $600 and the estimated useful life 4 years. The company uses straight-line depreciation computed monthly.

Required: A. What was the depreciation expense amount per month?

B. What was the amount of accumulated depreciation at December 31, 2017 and the net book value of the truck at December 31, 2017?

Explanation / Answer

Ans)

a) Cost of machine = 10,000 + 1200 + 1000 + 400 = 12,600

Depreciation = 12600 - 600 / 4 = 3000 per year

Depreciation per month = 3000 / 12 = 250 per month

b) Accumulated depreciation = 3000 X 2 = 6000

Net book value of truck = 12,600 - 6000 = 6600

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