On Jan 1, 2010, you purchased a vehicle costing $28,000 with additional costs of

Question

On Jan 1, 2010, you purchased a vehicle costing $28,000 with additional costs of taxes, $1,750 and shipping costs, $250. Based on historical records, you estimate the useful life to be 8 years and the estimated salvage value to be $1,500. You depreciate this vehicle using the double- declining balance depreciation method. On January 1, 2014, you revise the asset's total estimated useful life from 8 years to 9 years and change the estimated salvage value to $1,000. Required: Compute the depreciation for each year and a) prepare the appropriate adjusting journal entry to record the depreciation for years 1, 5, and 9 and b) show the balance sheet presentation of the vehicle for years 5 and 9. (Round answers to O decimal places) 2 ) Balance sheet 1) Account Titles and Explanation P. R.Debit

Explanation / Answer

Answer 1. Journal Entry Date Particulars Dr. Amt. Cr. Amt. 31-Dec-10 Depreciation Expense                  7,500    Accumulated Depreciation - Vehicle                7,500 (record the depreciation expense) 31-Dec-14 Depreciation Expense                  3,797    Accumulated Depreciation - Vehicle                3,797 (record the depreciation expense) 31-Dec-18 Depreciation Expense                     492    Accumulated Depreciation - Vehicle                   492 (record the depreciation expense) Balance Sheet (Partial) For the Period Ended Dec 31 12/31/2014 12/31/2018 Property, Plant & Equipment Vehicle - Beginning Balance               30,000             30,000 Accumulated Depreciation             (24,305)           (29,262) Net Value                  5,695                   738 Rate of dep. Under DDB = 2 X 12.50% (Rate of Dep. Under Straight Line Method) Rate of dep. Under DDB = 25% Purchased Cost - Equipment    28,000.00 Additional Cost of Taxes       1,750.00 Shipping Cost          250.00 Total Cost of Vehicle    30,000.00 Date Beg. Bal. Dep. Ending Bal. 1-Jan-10                   -                   -            30,000 31-Dec-10          30,000          7,500          22,500 31-Dec-11          22,500          5,625          16,875 31-Dec-12          16,875          4,219          12,656 31-Dec-13          12,656          3,164             9,492 Life of Vehicle as on 1 Jan, 2014 = 4 Years now, revise to 5 Years Now, new rate of Depreciation: Rate of dep. Under DDB = 2 X 20% (Rate of Dep. Under Straight Line Method) Rate of dep. Under DDB = 40% Date Beg. Bal. Dep. Ending Bal. 1-Jan-14            9,492                 -               9,492 31-Dec-14            9,492          3,797             5,695 31-Dec-15            5,695          2,278             3,417 31-Dec-16            3,417          1,367             2,050 31-Dec-17            2,050             820             1,230 31-Dec-18            1,230             492                738

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