A truck with a cost of $82,000 has an estimated residual value of $16,000, has an estimated useful life of 12 years

A truck with a cost of $82,000 has an estimated residual value of $16,000, has an estimated useful life of 12 years, and is depreciated by the straight-line method. (a) Determine the amount of the annual depreciation. (b) Determine the book value at the end of the seventh year of use. (c) Assuming that at the start of the eighth year the remaining life is estimated to be six years and the residual value is estimated to be $12,000, determine the depreciation expense for each of the remaining six years.

Answer:

a. $5,500  [($82,000 – $16,000) ÷ 12]

b. $43,500  [$82,000 –  ($5,500 × 7)]

c. $5,250  [($43,500 – $12,000) ÷ 6]

Equipment acquired on January 6 at a cost of $375,000 has an estimated useful life of 20 years and an estimated residual value of $25,000.

Equipment acquired on January 6 at a cost of $375,000 has an estimated useful life of 20 years and an estimated residual value of $25,000.

a. What was the annual amount of depreciation for the Years 1–3 using the straight-line method of depreciation?

b. What was the book value of the equipment on January 1 of Year 4?

c. Assuming that the equipment was sold on January 3 of Year 4 for $300,000, journalize the entry to record the sale.

d. Assuming that the equipment had been sold on January 3 of Year 4 for $325,000 instead of $300,000, journalize the entry to record the sale.

Answer:

a. Year 1 depreciation expense:  $17,500  [($375,000 – $25,000) ÷ 20]

Year 2 depreciation expense:  $17,500

Year 3 depreciation expense:  $17,500

b. $322,500  [$375,000 – ($17,500 × 3)]

c.  Year 4

 Jan. 3 Cash300,000

Accumulated Depreciation—Equipment 52,500

Loss on Sale of Equipment 22,500

Equipment375,000

d.  Year 4

 Jan. 3 Cash325,000

Accumulated Depreciation—Equipment 52,500

Equipment375,000

Gain on Sale of Equipment2,500

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