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depreciation expense for Year

depreciation expense for Year

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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### Depreciation Calculation for a Truck A truck with an estimated useful life of four years was acquired on January 1, Year 1 for $24,000. The estimated residual (salvage) value of the truck is $4,000. Compute the depreciation expense for Year 1 and Year 2. Also, compute the book value of the truck at the end of Year 2. #### Depreciation Methods 1. **Straight Line Method** - **Year 1 Depreciation Expense:** _______________ - **Year 2 Depreciation Expense:** _______________ - **Year 2 Book Value:** _______________ 2. **Double-Declining Balance Method** - **Year 1 Depreciation Expense:** _______________ - **Year 2 Depreciation Expense:** _______________ - **Year 2 Book Value:** _______________ ### Explanation - **Straight Line Method:** Depreciates the asset evenly over its useful life. - **Double-Declining Balance Method:** Accelerates depreciation, allowing higher expenses in the earlier years of the asset's life. To calculate, determine the annual depreciation using each method and subtract these amounts to find the book value at the end of Year 2.
Transcribed Image Text:### Depreciation Calculation for a Truck A truck with an estimated useful life of four years was acquired on January 1, Year 1 for $24,000. The estimated residual (salvage) value of the truck is $4,000. Compute the depreciation expense for Year 1 and Year 2. Also, compute the book value of the truck at the end of Year 2. #### Depreciation Methods 1. **Straight Line Method** - **Year 1 Depreciation Expense:** _______________ - **Year 2 Depreciation Expense:** _______________ - **Year 2 Book Value:** _______________ 2. **Double-Declining Balance Method** - **Year 1 Depreciation Expense:** _______________ - **Year 2 Depreciation Expense:** _______________ - **Year 2 Book Value:** _______________ ### Explanation - **Straight Line Method:** Depreciates the asset evenly over its useful life. - **Double-Declining Balance Method:** Accelerates depreciation, allowing higher expenses in the earlier years of the asset's life. To calculate, determine the annual depreciation using each method and subtract these amounts to find the book value at the end of Year 2.
Expert Solution
(1) Formula to calculate depreciation under straight line method

Annual depreciation expense = (Cost of acquisition - Residual value)/Estimated useful life

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