calculate and analyze depreciation under alternative methods

On January 1, 2010, the super fast subs company purchased a delivery automobile for $31,000.  The estimated useful life of the vehicle is five years, and the estimated salvage value is 1,000. The company expects the automobile to be driven 200,000 miles during its service life. Actual miles driven were:

Year    Miles

2010   35,000

2011   40,000

2012   45,000

2013   39,000

2014   41,000

 

Requirements

1. Calculate the depreciation expense for each year of the five-year-life of the automobile using the following methods. (Round your answers to the nearest dollar.)

a, Straight-line method

b. Double-declining balance method

c. Activity method

 

2. How does the choice of depreciation methods affect net income in each of the years? How does the choice of depreciation methods affect the balance sheet in each of the years?

Sheet1

–

0

A

6
7

Amount

Amount

10

Amount

Amount

Amount

Amount

Amount

20

Year

2010

2011

2012

2013

2014

Amount

$ – 0 $ – 0

																																																																																									Problem	6	7	A	Name
Section
B	C	D	E	F	G	H
5	Data Input Section:	Super Fast Subs Company
Cost of asset, January 1,	20	10									Amount
8	Estimated residual value
9	Estimated useful life
	Year	Miles driven
11		2010
12		2011
13		2012
14		2013
15		2014
16	Total miles driven over life of equipment	Formula 1
17	Cost per mile (cost-residual/units)	Formula 2
18	Output Section:
19	Part 1.	Depreciation Expense Per Year
Double
21	Straight	Activity	Declining
22	Line	Method	Balance
23	Formula 3	Formula 8	Formula 13
24	Formula 4	Formula 9	Formula 14
25	Formula 5	Formula 10	Formula 15
26	Formula 6	Formula 11	Formula 16
27	Formula 7	Formula 12
28			$ – 0
29
30	Helpful Hint:
31	Use the following functions to calculate depreciation
32	=SLN(cost,salvage,life)
33	=DDB(cost,salvage,life,period)
34	Part 2.
35	Type answer starting here
36
37
38
39
40
41
42
End of Problem

&LReimers, Financial Accounting 3e
CyberCoach:
Enter the following formula:
=(H7-H8)/H16
CyberCoach:
Enter the following formula:
=G11*$H$17
Then copy down
CyberCoach:
You have to enter this amount manually.

Sheet2

Sheet3