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Calculation using different depreciation methods

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

Required:
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

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

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