Exercise 10-7 Linton Company purchased a delivery truck for $27,000 on January 1

Question

Exercise 10-7 Linton Company purchased a delivery truck for $27,000 on January 1, 2017. The truck has an expected salvage value of $1,400, and is expected to be driven 106,000 miles over its estimated useful life of 8 years. Actual miles driven were 15,600 in 2017 and 10,000 in 2018. Calculate depreciation expense per mile under units-of-activity method. (Round answer to 2 decimal places eg. 0.50.) Depreciation expense $ per mile SHOW LIST OF ACCOUNTS LINK TO TEXT Compute depreciation expense for 2017 and 2018 using (1) the straight-line method, (2) the units-of-activity method, and (3) the double-declining-balance method. (Round depreciation cost per unit to 2 decimal places, e.g. 0.50 and depreciation rate to 0 decimal places, e.g. 15%. Round final answers to 0 decimal places, e.g. 2,125.) Depreciation Expense 2017 2018 (1) Straight-line method (2) Units-of-activity method (3) Declining-balance method s SHOW LIST OF ACCOUNTS LINK TO TEXT

Explanation / Answer

CALCULATION OF THE DEPRECIATION AS PER STRAIGHT LINE METHOD FOR TRUCK Purchase Cost of Truck $                27,000.00 Less: Salvage Value $                  1,400.00 Net Value for Depreciation $                25,600.00 Usefule life of the Assets (In Years )                               8.00 Depreciation per year = Value for Depreciation / 8 years = $                  3,200.00 Depreciation for the year 2017 $                  3,200.00 Depreciation for the year 2018 $                  3,200.00 CALCULATION OF THE DEPRECIATION AS PER UNITS OF ACTIVITY METHOD Purchase Cost of Machine $                27,000.00 Less: Salvage Value $                  1,400.00 Net Value for Depreciation $                25,600.00 Expected mies over the life =                1,06,000.00 Miles Depreciation per miles = ( $ 25,600 / 106,000 Miles)                               0.24 Per Miles Depreciation for the year 2017 = (15600 *0.24)                      3,744.00 Depreciation for the year 2018 = (10000 *0.24)                      2,400.00 CALCULATION OF THE DEPRECIATION AS PER SUM OF DOUBLE DECLINE METHOD Purchase Cost of Machine $                27,000.00 Useful Life =                               8.00 Depreciation per year =(1 / 8 Years)                            0.125 So the depreciation per year = 12.5% But, As per the double decline method = (12.5% X 2) 25% Rate of Depreciation = 0.25 or 25% CACLULATION OF THE DEPRECIATION FOR THE YEAR 2017 AND 2018 Assets Value =                    27,000.00 Less : Depreciation for the year 2017 @ 25% = $                  6,750.00 Closing Book Value for the year 2017 = $                20,250.00 Opening Balance for the year 2018 $                20,250.00 Depreciation for the year 2018 @ 25% = $                  5,062.50 Particulars Depreciation Expenses Year 2017 Year 2018 1) Straight Line Method                      3,200.00              3,200.00 2) Units of activity method                      3,744.00              2,400.00 3) Decliining Balacne Method                      6,750.00 $          5,062.50 ANSWER =2 JOUNRAL ENTRY 1) For record the depreciation expenses on the basis of SLM Depreciation                      3,200.00     To Truck              3,200.00 (Being depreciation expenses is recorded) ANSWER =3 : PRESENTATION OF THE BALANCE SHEET Truck                    27,000.00 Less: Depreciation for the year                      3,200.00 Net Value =                    23,800.00

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