On Jan 1 2010 you purchased a vehicle costing 28000 with add

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 vears and the estimated salvage value to be $1,500 You depreciate this vehicle using the double- declining balance depreciation method. On January i, 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: 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 0 decimal places) 1 DebitCre Date Account Titles and Explanation

Solution

Rate of Dep. Under DDBM = 2 X 12.50% (Rate of Dep. Under Straight Line Method) Rate of Dep. Under DDBM = 25% Book Value of Vehicle on Jan 1, 2010 = $28,000 + $1,750 + $250 Book Value of Vehicle on Jan 1, 2010 = $30,000 Year Book Value Beginning Depreciation Accumulated depreciation Book Value Ending 0                     -                          -                            -         30,000.00 1      30,000.00           7,500.00             7,500.00       22,500.00 2      22,500.00           5,625.00           13,125.00       16,875.00 3      16,875.00           4,219.00           17,344.00       12,656.00 4      12,656.00           3,164.00           20,508.00          9,492.00 On Jan 1, 2014, Vehicle total estimated life is revised from 8 years to 9 Years Now, Revised Rate of Dep. Under DDBM = 2 X 20% (Rate of Dep. Under Straight Line Method) Revised Rate of Dep. Under DDBM = 40% (From Jan 1, 2014) Year Book Value Beginning Depreciation Accumulated depreciation Book Value Ending 4                     -                          -             20,508.00          9,492.00 5        9,492.00           3,797.00           24,305.00          5,695.00 6        5,695.00           2,278.00           26,583.00          3,417.00 7        3,417.00           1,367.00           27,950.00          2,050.00 8        2,050.00               820.00           28,770.00          1,230.00 9        1,230.00               492.00           29,262.00             738.00 Journal Entry Date Particulars Dr. Amt. Cr. Amt. 31-Dec-10 Depreciation Expense    7,500.00 (Year 1)    Accumulated Depreciation - Vehicle    7,500.00 (To record the depreciation exzpense) 31-Dec-14 Depreciation Expense    3,797.00 (Year 5)    Accumulated Depreciation - Vehicle    3,797.00 (To record the depreciation exzpense) 31-Dec-18 Depreciation Expense       492.00 (Year 9)    Accumulated Depreciation - Vehicle       492.00 (To record the depreciation exzpense) Balance Sheet (Partial) Year 1 Year 5 Year 9 Vehicle    30,000.00    30,000.00    30,000.00 Accumulated Depreciation      7,500.00    24,305.00    29,262.00 Net Value    22,500.00      5,695.00          738.00