Depreciation calculation methods Kleener Co. acquired a new delivery truck at the beginning of its current fiscal year. The truck cost $52,000 and has an estimated useful life of four years and an estimated salvage value of $8,000. Required: a. Calculate depreciation expense for each year of the truck’s life using 1. Straight-line depreciation. 2. Double-declining-balance depreciation. b. Calculate the truck’s net book value at the end of its third year of use under each depreciation method. c. Assume that Kleener Co. had no more use for the truck after the end of the third year and that at the beginning of the fourth year it had an offer from a buyer who was willing to pay $12,400 for the truck. Should the depreciation method used by Kleener Co. affect the decision to sell the truck?
Depreciation Methods
The word "depreciation" is defined as an accounting method wherein the cost of tangible assets is spread over its useful life and it usually denotes how much of the assets value has been used up. The depreciation is usually considered as an operating expense. The main reason behind depreciation includes wear and tear of the assets, obsolescence etc.
Depreciation Accounting
In terms of accounting, with the passage of time the value of a fixed asset (like machinery, plants, furniture etc.) goes down over a specific period of time is known as depreciation. Now, the question comes in your mind, why the value of the fixed asset reduces over time.
Depreciation calculation methods Kleener Co. acquired a new delivery truck at the beginning of its current fiscal year. The truck cost $52,000 and has an estimated useful life of four years and an estimated salvage value of $8,000.
Required:
a. Calculate depreciation expense for each year of the truck’s life using 1. Straight-line depreciation. 2. Double-declining-balance depreciation.
b. Calculate the truck’s net book value at the end of its third year of use under each depreciation method.
c. Assume that Kleener Co. had no more use for the truck after the end of the third year and that at the beginning of the fourth year it had an offer from a buyer who was willing to pay $12,400 for the truck. Should the depreciation method used by Kleener Co. affect the decision to sell the truck?
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