Depreciation Calculation Methods for Kleener Co.
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Kleener Co. acquired a new delivery truck at the beginning of its current fiscal year. The truck cost $26,000 and has an estimated useful life of four years and an estimated salvage value of $4,000.
Required:
a. Calculate depreciation expense for each year of the truck's life using:
1. Straight-line depreciation.
2. Sum-of-the-years'-digits depreciation.
3. Double-declining-balance depreciation.
b. Calculate the truck's net book value at the end of its third year of use under each depreciation method.
c. Assume that Kleener Co. had no more use for the truck after the end of the third year and that at the beginning of the fourth year it had an offer from a buyer who was willing to pay $6,200 for the truck. Should the depreciation method used by Kleener Co. affect the decision to sell the truck?
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Solution Summary
The solution (a) calculates depreciation expense for each year of the truck's life using straight-line depreciation, sum-of-the-years'-digits depreciation and double-declining-balance depreciation, (b) calculate the truck's net book value at the end of its third year of use under each depreciation method, and (c) answers the question: should the depreciation method used by Kleener Co. affect the decision to sell the truck?
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