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Depreciation for Partial Periods

Malone Delivery Company purchased a new delivery truck for $53,400 on April 1, 2016. The truck is expected to have a service life of 5 years or 124,800 miles and a residual value of $5,280. The truck was driven 10,200 miles in 2016 and 12,800 miles in 2017. Malone computes depreciation to the nearest whole month.

Required:

Compute depreciation expense for 2016 and 2017 using the
For interim computations, carry amounts out to two decimal places. Round your final answers to the nearest dollar.
Straight-line method

Sum-of-the-years'-digits method

Double-declining-balance method

Activity method

For each method, what is the book value of the machine at the end of 2016? At the end of 2017?
(Round your answers to the nearest dollar.)
Straight-line method

Sum-of-the-years'-digits method

Double-declining-balance method

Activity method

The book value of the asset in the early years of the asset's service will be under an accelerated method as compared to the straight-line method. The method is appropriate when the service life of the asset is affected primarily by the amount the asset is used.

Explanation / Answer

Cost of the Asset =$53400 Residual value =$5280 depreciable cost of the Asset =Cost - Residual value =$53400-$5280=$48120 calcualtion depreciation And Book values Depreciation Under Straight Line method Useful life =5 years Depreciation per year = Depreciable Cost / Service life =$48120/5 =$9624 Depreciation for the year 2016=$9624 Depreciation for the year 2017=$9624 Book value of machine end of 2016 =Cost of the Asset - Depreciation =$53400-$9624=$43776 Book value of machine end of 2017 =Book Value end of 2016 - Depreciation =$43776-$9624=$34152 Depreciation under Sum of years digits methods Depreciation base remaining life Depreciation faraction Depreciation Expense 2016 48120 5 5/15 16040 48120*5/15 2017 48120 4 4/15 12832 48120*4/15 (5+4+3+2+1=15) Book value of machine end of 2016 =Cost of the Asset - Depreciation =$53400-$16040=$37360 Book value of machine end of 2017 =Book Value end of 2016 - Depreciation =$37360-$12832=$24528 Depreciation under Double Declining balance method Depreciation rate under straight line method = 1/Use ful life =1/5=20% Depreciation rate under Double decliing balance method =2* straight line method =2*20% =40% year depreciable Amount Depreciation rate Depreciation Closing Book Value 2016 53400 40% $21360 $32040 2017 32040 40% $12816 $19224 Depreciation under Activity method Truck Activity in miles =124800 Miles depreciation cost per Mile activity =Depreciable cost / Miles Activity =($53400-$5280) /124800 =$48120/124800 =0.385577 depreciation under activity Activity Miles Cost per mile Depreciation expense 2016 10200 0.385577 3933 Rounded off nearest dollar 2017 12800 0.385577 4935 Rounded off nearest dollar Book value of machine end of 2016 =Cost of the Asset - Depreciation =$53400-$3933=$49467 Book value of machine end of 2017 =Book Value end of 2016 - Depreciation =$49467-$4935=$44532

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