A truck acquired at a cost of $69,000 has an estimated residual value of $12,000, has an estimated useful life of 300,000 miles

A truck acquired at a cost of $69,000 has an estimated residual value of $12,000, has an estimated useful life of 300,000 miles, and was driven 77,000 miles during the year. 

Determine (a) the depreciable cost, (b) the depreciation rate, and (c) the units-of-activity depreciation for the year.

Answer:

a. $57,000  ($69,000 – $12,000)

b. $0.19 per mile  ($57,000 ÷ 300,000 miles)

c. $14,630  (77,000 miles × $0.19)

Equipment acquired on January 8 at a cost of $168,000 has an estimated useful life of 18 years,

Equipment acquired on January 8 at a cost of $168,000 has an estimated useful life of 18 years, has an estimated residual value of $15,000, and is depreciated by the straight-line method.

a. What was the book value of the equipment at December 31 the end of the fourth year?

b. Assuming that the equipment was sold on April 1 of the fifth year for $125,000, journalize the entries to record (1) depreciation for the three months until the sale date and (2) the sale of the equipment.

Answer:

a. Cost of equipment.............................................................................. $168,000

Less accumulated depreciation at end of fourth year, December 31

(4 years at $8,500 per year)............................................................... 34,000

Book value at end of fourth year, December 31....................................... $134,000

Yearly depreciation = ($168,000 – $15,000) ÷ 18 = $8,500

b. Apr.  1 Depreciation Expense—Equipment 2,125

Accumulated Depreciation—Equipment 2,125

Equipment depreciation

($8,500 × 3 ÷ 12).

1 Cash125,000

Accumulated Depreciation—Equipment 36,125

Loss on Sale of Equipment 6,875

Equipment168,000

*Accumulated Depreciation—Equipment = $34,000 + $2,125 = $36,125

A building with a cost of $1,200,000 has an estimated residual value of $250,000, has an estimated useful life of 40 years

A building with a cost of $1,200,000 has an estimated residual value of $250,000, has an estimated useful life of 40 years, and is depreciated by the straight-line method. (a) What is the amount of the annual depreciation? (b) What is the book value at the end of the twenty-eighth year of use? (c) If at the start of the twenty-ninth year it is estimated that the remaining life is 10 years and that the residual value is $180,000, what is the depreciation expense for each of the remaining 10 years?

Answer:

a. $23,750  [($1,200,000 – $250,000) ÷ 40] or [($1,200,000 – $250,000) × 2.5%]

b. $535,000  [$1,200,000 – ($23,750 × 28 yrs.)]

c. $35,500  [($535,000 – $180,000) ÷ 10 yrs.]

Equipment acquired at a cost of $105,000 has an estimated residual value of $12,000 and an estimated useful life of 10 years

Equipment acquired at a cost of $105,000 has an estimated residual value of $12,000 and an estimated useful life of 10 years. It was placed into service on May 1 of the current fiscal year, which ends on December 31. Determine the depreciation for the current fiscal year and for the following fiscal year by (a) the straight-line method and (b) the double-declining-balance method.

Answer:

a. 

Year 1:  ($105,000 – $12,000) ÷ 10 = $9,300; $9,300 × (8 ÷ 12) = $6,200

Year 2:  ($105,000 – $12,000) ÷ 10 = $9,300

b. 

Year 1:  8 ÷ 12 × 20% of $105,000 = $14,000

Year 2:  20% of ($105,000 – $14,000) = $18,200