I. Credit Company purchased a delivery van on June 1, 2016 for $45,000. The van
ID: 2576725 • Letter: I
Question
I. Credit Company purchased a delivery van on June 1, 2016 for $45,000. The van was expected to remain in service for 4 years (or 100,000 miles) and has a residual value of $5,000. The van traveled 30,000 miles the first year, 25,000 miles the second year, and 22,500 miles in the third and fourth year. Prepare a schedule of Depreciation e per year for the years of the asset's life using A) Straight-line method; B) Units of production method; and C) Double declining balance method. Deprec. Method 2016 2017 2018 2019Explanation / Answer
I.
Cost of Van
$ 45,000
Life of Van
4 years
Residual Value
$ 5,000
Depreciation Method
2016
2017
2018
2019
Straight Line Method
$ 10,000
$ 10,000
$ 10,000
$ 10,000
= (45000 - 5000)/4
Units of Production Method
Miles Travelled
30000
25000
22500
22500
Depreciation
$ 12,000
$ 10,000
$ 9,000
$ 9,000
=( 45000 - 5000) * Miles Travelled / Total Miles
Double Declining Balance Method
Straigh line method rate
22.22%
Double Declining Depreciation Rate
44.44%
Depreciation
$ 20,000.00
$ 11,111.11
$ 6,172.84
$ 3,429.36
III.
FIFO Method
Issue
Balance
Units
Rate
Value
Units
Rate
Value
Opening Inventory
120
$ 8.09
$ 970.80
120
$ 8.09
$ 970.80
Purchase
200
$ 8.30
$ 1,660.00
200
$ 8.30
$ 1,660.00
Purchase
410
$ 8.41
$ 3,448.10
310
$ 8.41
$ 2,607.10
100
$ 8.41
$ 841.00
Purchase
310
$ 8.69
$ 2,693.90
310
$ 8.69
$ 2,693.90
Sold 630 Units
Cost of Goods Sold
$ 5,237.90
Ending Inventory
$ 3,534.90
LIFO
Issue
Balance
Units
Rate
Value
Units
Rate
Value
Opening Inventory
120
$ 8.09
$ 970.80
120
$ 8.09
$ 970.80
Purchase
200
$ 8.30
$ 1,660.00
200
$ 8.30
$ 1,660.00
Purchase
410
$ 8.41
$ 3,448.10
320
$ 8.41
$ 2,691.20
90
$ 8.41
$ 756.90
Purchase
310
$ 8.69
$ 2,693.90
310
$ 8.69
$ 2,693.90
Sold 630 Units
Cost of Goods Sold
$ 5,385.10
Ending Inventory
$ 3,387.70
Weighted Average Method
Units
Rate
Value
Opening Inventory
120
$ 8.09
$ 970.80
Purchase
200
$ 8.30
$ 1,660.00
Purchase
410
$ 8.41
$ 3,448.10
Purchase
310
$ 8.69
$ 2,693.90
TOTAL
1040
$ 8.44
$ 8,772.80
Sold 630 Units
Cost of Goods Sold
$ 5,314.29
Ending Inventory
$ 3,458.51
I.
Cost of Van
$ 45,000
Life of Van
4 years
Residual Value
$ 5,000
Depreciation Method
2016
2017
2018
2019
Straight Line Method
$ 10,000
$ 10,000
$ 10,000
$ 10,000
= (45000 - 5000)/4
Units of Production Method
Miles Travelled
30000
25000
22500
22500
Depreciation
$ 12,000
$ 10,000
$ 9,000
$ 9,000
=( 45000 - 5000) * Miles Travelled / Total Miles
Double Declining Balance Method
Straigh line method rate
22.22%
Double Declining Depreciation Rate
44.44%
Depreciation
$ 20,000.00
$ 11,111.11
$ 6,172.84
$ 3,429.36