Depreciation for Partial Periods Clifford Delivery Company p

Depreciation for Partial Periods

Clifford Delivery Company purchased a new delivery truck for $54,600 on April 1, 2016. The truck is expected to have a service life of 10 years or 109,200 miles and a residual value of $4,800. The truck was driven 11,300 miles in 2016 and 12,700 miles in 2017. Clifford 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.

2016	$
2017	$

Solution

Straight line method: Depreciation for each year= (Cost-Salvage value)/Useful life of the asset=(54600-4800)/10=$ 4980 2016 $ 4980 Book value=54600-4980=$ 49620 2017 $ 4980 Book value=49620-4980=$ 44640 Sum-of-the-years\'-digits method: Sum of the years =10+9+8+7+6+5+4+3+2+1=55 2016 Applicable percentage=10/55=18.18 % Depreciation=(54600-4800)*18.18%=$ 9054 Book value=54600-9054=$ 45546 2017 Applicable percentage=9/55=16.36 % Depreciation=(54600-4800)*16.36%=$ 8147 Book value=45546-8147=37399 Double declining balance method: Depreciation=Cost*double declining rate Double declining rate=2*Straight line rate=2*(1/10)=20% 2016 Depreciation=54600*20%=$ 10920 Book value=54600-10920=$ 43680 2017 Depreciation=43680*20%=$ 8736 Book value=43680-8736=34944 Activity method: Depreciation per mile=(Cost-Salvage value)/expected miles driven=(54600-4800)/109200=0.46 per mile 2016 Miles driven=11300 Depreciation=11300*0.46=$ 5198 Book value=54600-5198=$ 49402 2017 Miles driven=12700 Depreciation=12700*0.46=$ 5842 Book value=49402-5842=$ 43560