Hi ! I need help with this problem. If anyone could help me with it I would real
ID: 2642961 • Letter: H
Question
Hi ! I need help with this problem. If anyone could help me with it I would really apperciate it! Accounting isnt my best subject and im really bad with numbers.
Exercise 9-7
Tanger Company purchased a delivery truck for $36,000 on January 1, 2014. The truck has an expected salvage value of $6,000, and is expected to be driven 100,000 miles over its estimated useful life of 8 years. Actual miles driven were 15,000 in 2014 and 12,000 in 2015.
Calculate depreciable cost per unit.
Answer: Depreciable Cost Per Unit is = 0.3 per mile.
Is that correct? And how do I go about doing this next equation
Question: Compute depreciation expense for 2014 and 2015 using the straight-line method, the units-of-activity method, and the double-declining-balance method.
If someone could help me! I would be really thankful! Im struggling in this area of accounting.
Explanation / Answer
Straight-line method
Depreciation expense = (Cost - Residual value)/Useful life
Cost = $36,000
Salvage Value (Residual value) = $6,000
Useful life = 8 years
Depreciation expense for 2014 and 2015 = ($36,000 - $6,000)/8 = $3,750
Double-declining-balance method
Depreciation expense = Book value X Depreciation rate
Book value for 2014 = $36,000
Depreciation rate for double declining balance method = Straight line depreciation rate x 200%
Useful life = 8 years
Straight line depreciation rate = 1/8 = 12.50% per year
Depreciation rate for double declining balance method = 12.50% X 200% = 25%
Depreciation expense for 2014 = $36,000 X 25% = $9,000
Book value for 2015 = $36,000 - $9,000 = $27,000
Depreciation expense for 2015 = $27,000 X 25% = $6,750
Units-of-activity method
Cost = $36,000
Salvage Value (Residual value) = $6,000
Expected miles to be driven = 100,000 miles
Rate of depreciation per unit = ($36,000 - $6,000)/100,000 miles = 0.3 per miiles
Depreciation expense for 2014 = 15,000 miles X 0.3 per miles = $4,500
Depreciation expense for 2015 = 12000 miles X 0.3 per miles = $3,600
Note:
In the case of straight-line depreciation, equal amount of depreciation is charged every year throughout the life of the asset.