Answer:
Clifford Delivery Company
1. Depreciation Expense for 2019 and 2020:
Straight-line Sum-of-the-years Double-declining Activity method
2019 ($6,600/12*9) 5/12 * $33,000 40% *$36,000 8/120 * $33,000
= $4,950 = $13,750 = $14,400 = $2,200
2020 = ($6,600/12*12) 4/12 * $33,000 40% *$21,600 20/120 * $33,000
= $6,600 = $11,000 = $8,640 = $5,500
2. Book value at the end of 2019:
Straight-line Sum-of-the-years Double-declining Activity method
Cost $36,000 $36,000 $36,000 $36,000
Depreciation
Expense 4,950 $10,313 $10,800 $2,200
Book Value, End
of 2019 $31,050 $25,687 $25,200 $33,800
Explanation:
a) Data and Calculations:
Cost of delivery truck = $36,000
Purchase date = April 1, 2019
Estimated useful life = 5 years or 120,000 miles
Residual value = $3,000
Depreciable amount = $33,000 ($36,000 - $3,000)
Annual straight-line depreciation expense = $6,60 ($33,000/5)
Straight-line Sum-of-the-years Double-declining Activity method
2019 ($6,600/12*9) 5/12 * $33,000 40% *$36,000 8/120 * $33,000
= $4,950 = $13,750/12*9 = $14,400 /12*9 = $2,200
= $4,950 = $10,313 = $10,800 = $2,200
2020 = ($6,600/12*12) 4/12 * $33,000 40% *$25,200 20/120 * $33,000
= $6,600 = $11,000 = $10,080 = $5,500
Straight-line Sum-of-the-years Double-declining Activity method
Cost $36,000 $36,000 $36,000 $36,000
Depreciation 4,950 $10,313 $10,800 $2,200
Book Value End
of 2019 $31,050 $25,687 $25,200 $33,800
a) The straight-line method divides the depreciable amount by the number of useful life to get an amount that is charged every year.
b) Sum of the years digit method sums the years and uses the denominator to apportion the depreciable amount, with the first year having the largest number as numerator.
c) Double-declining method doubles the straight-line rate and depreciates on declining value of the asset. It apportions more cost in the earlier years. For the last year, consideration is then given to the salvage value because the asset cannot be depreciated more than its depreciable amount.
d) Activity method calculates the depreciation expense based on the activity usage.
