9 Alpha Company has the following items in its equipment acc

9. Alpha Company has the following items in its equipment account: Asset &Date Purchased Method of Depreciation Cost Salvage Value 1 Delivery Truck (4/30/15) Units of Activity $60,000 $11,000 2 Office Furniture (6/1/15/) Straight line $15,000 $500 3 Computer Double Declining $5,000 $700 The delivery truck is estimated to have a life cycle of 200,000 miles. It was driven for 1. 16,500 miles in 201 24,600 miles in 2016 2. The Computer Furniture has a life expectancy of 7 years 3. The Computer has a life expectancy of 4 years Round any per unit calculations to the nearest half penny. Round all annual depreciation expenses to the nearest dollar. Use this information to compute for Fiscal Year 2016 the following values: 1. Book Value of the Delivery Truck 2. Depreciation Expense- Truck 3. Book value of the office furniture 4. Depreciation Expense- Office Furniture 5. Book value of the Computer 6. Depreciation Expense- Computer

Solution

1 Straight line depreciation = (Cost of asset - salvage value )/ Life of the asset Office furniture Depreciation expense = (15000-500) /7 2071 Accumulated depreciation Depreciation expense Book value 0 15000 2015 2071*7/12 1,208 1,208 13,792 2016 2071*12/12 2,071 3,279 11,721 2 Double declining method Computer Depreciation rate = [(cost of asset / life of asset ) / cost of asset ] *2 Depreciation rate = [5,000/4)/15,000] *2 Depreciation rate = 50% Depreciation = written down value * depreciation rate Accumulated depreciation Depreciation expense Book value 5000 2015 Depreciation = 5,000 * 50%   2500 2,500 2,500 2016 Depreciation = (5000-2500) *50%   = 1,250 3,750 1,250 3 Units of production method Delivery truck Depreciation per machine hour = (Cost of asset - salvage value )/ total machine hour Depreciation per machine hour = (60,000-11,000 )/200,000 Depreciation per item 0.25 Accumulated depreciation Depreciation expense Book value 60000 2015 .25*16500 4125 4,125 55,875 2016 .25*24600 6150 10,275 49,725