Alpha Company purchased a refrigerated delivery truck for $65,500 on April 30, 2016. The plan is...

Question:

Alpha Company purchased a refrigerated delivery truck for $65,500 on April 30, 2016. The plan is to use the truck for 5 years and then replace it. At the end of its useful life the truck is expected to have a salvage value of $10,000.

a. Prepare the depreciation table for Alpha's truck assuming that the company uses the straight-line method for depreciation.

b. Prepare the depreciation table for Alpha's truck assuming that the company uses the double-declining-balance depreciation method.

c. Compute the depreciation expense for 2016 for Alpha's truck assuming the truck has an expected life of 200,000 miles and during 2016 the truck was driven 24,450 miles. Round your depreciation expense per mile to three decimal places to make your overall calculation of the 2016 depreciation expense.

Depreciation:

Depreciation is the systematic expensing of an asset's loss of usefulness over time. Depreciation may be calculated using various methods including the straight-line method, double-declining balance method, and units-of-activity method. The straight-line method is the simplest calculation method. The double-declining balance method is more complex but also offers tax benefits in the asset's early years. Finally, the units-of-activity method, in many cases, best reflects actual wear and tear.

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a. Prepare the depreciation table for Alpha's truck assuming that the company uses the straight-line method for depreciation.

Straight...

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Depreciation: Definition, Formula & Examples

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Chapter 5 / Lesson 14
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Learn about different methods of depreciation and depreciation expense, including: straight-line and declining methods, as well as the difference between physical depreciation and economic depreciation.


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