Linton Company purchased a delivery truck for 26000 on Janua

Linton Company purchased a delivery truck for $26,000 on January 1, 2017. The truck has an expected salvage value of $1,500, and is expected to be driven 108,000 miles over its estimated useful life of 8 years. Actual miles driven were 14,800 in 2017 and 15,000 in 2018.

1. Calculate depreciation expense per mile under units-of-activity method. (Round answer to 2 decimal places, e.g. 0.50.)

2.   

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

3. Assume that Linton uses the straight-line method. Show how the truck would be reported in the December 31, 2017, balance sheet. (Round answers to 0 decimal places, e.g. 2,125.)

Depreciation expense

$

Solution

Ans.1) Calculation for depreciation expense per mile under units of activity method: For 2017: Depreciation expense = (Cost - salvage value) x Actual miles driven / Expected miles driven = ($26,000 - $1,500) x 14,800 / 108,000 = 362,600,000 / 108,000 = $    3,357.41 Depreciation expense per mile = Deprecaition exepnse / Actual miles driven = $3,357.41 / 14,800 = $            0.23 For 2018: Depreciation expense = (Cost - salvage value) x Actual miles driven / Expected miles driven = ($22,648.59 - $1,500) x 15,000 / 108,000 = 317,228,850/ 108,000 = $    2,937.30 Depreciation expense per mile = Deprecaition exepnse / Actual miles driven = $2,937.30 / 15,000 = $            0.20 Ans.2) Calculation for depreciaion expense for the year 2017 and 2018: (i) Straight line method = Cost - Salvage Value / Useful life of asset = $26,000 - $1,500 / 8 = $24,500 / 8 = $    3,062.50 Depreciaiton expense will be same for all years i.e. $3,062.50 (ii) Units of activity method: For 2017: Depreciation expense = (Cost - salvage value) x Actual miles driven / Expected miles driven = ($26,000 - $1,500) x 14,800 / 108,000 = 362,600,000 / 108,000 = $    3,357.41 For 2018: Depreciation expense = (Cost - salvage value) x Actual miles driven / Expected miles driven = ($22,648.59 - $1,500) x 15,000 / 108,000 = 317,228,850/ 108,000 = $    2,937.30 (iii) Calculation for depreciaion expense for the year 2017 and 2018: Straight line method (in 2017)= Cost x 2/ Useful life of asset = $26,000 / 8 = $    6,500.00 Straight line method (in 2018)= (Cost - Accumulated dep.) x 2/ Useful life of asset = ($26,000 - $6,500) x 2 / 8 = $    4,875.00 Ans.3) Cost of truck reported in the balance sheet of December 31, 2017: Cost of truck = Cost - SLM depreciation = $26,000 - $3,062.50 = $ 22,937.50