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    Calculation using different depreciation methods

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    Depreciation calculation methods. Hill Co. acquired a new delivery truck at the
    beginning of its current fiscal year. The following information is available

    cost $ 100,000
    estimated useful life 6 years
    estimated salvage value $ 7,000

    a. Calculate depreciation expense for the first 4 years 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 Hill 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 Hill Co. affect the decision to sell the truck

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    Solution Preview

    Please see the attached file

    Cost of the truck 100,000
    Useful Life (years) 6
    Salvage Value 7,000

    1. Straight Line Depreciation

    Depreciable Value 93,000
    Depreciation per year 15,500
    Depreciation Expense for 4 years 62,000

    2. Sum of the years digit depreciation

    The life is 6 years, so sum of the years digits are 6+5+4+3+2+1=21
    The depreciation in 4 years is 6/21+5/21+4/21+3/21 = ...

    Solution Summary

    The solution explains the calculation of depreciation under straight-line, sum of years and double declining balance method