Question

prepare a depreciation schedule using a straight line method
Great Adventures Problem AP7-1 Part 3 3. Prepare a depreciation schedule using the straight-line method. GREAT ADVENTURES Year End of Year Amounts Depreciation Accumulated Expense Depreciation Book Value 2022 2023 2024 2025 2026 2027 Total $ 0

Answer 1

Under straight line method of depreciation, the amount to be depreciated for each year remains same.
Formula to calculate depreciation expense under straight line method
Depreciation expense	(Cost - Salvage value)/No of useful life
Calculation of cost of vehicle
Purchase price	$16,000
Add: Repaint expense	$7,000
Add: Cost for roof rack and hitch	$3,000
Total cost of vehicle	$26,000
Insurance purchase is expensed to income statement and not capitalized.
Painting, roof rack and hitch increases the future benefit of vehicle and is therefore capitalized.
The basic maintenance expense is expensed to income statement and not capitalized.
Depreciation expense per year	(26000-6500)/5
Depreciation expense per year	$3,900
Vehicle is purchased on 01st July 2022 and thus only 6 months depreciation would be charged in 2022.
Six month depreciation	$1,950	3900*(6/12)
Depreciation schedule using straight line method is shown below
GREAT ADVENTURES
End of Year amounts
Year	Depreciation expense	Accumulated depreciation	Book value
2022	$1,950	$1,950	$24,050
2023	$3,900	$5,850	$20,150
2024	$3,900	$9,750	$16,250
2025	$3,900	$13,650	$12,350
2026	$3,900	$17,550	$8,450
2027	$1,950	$19,500	$6,500
Total	$19,500
Accumulated depreciation = Current year depreciation plus previous year accumulated depreciation balance.
Book value	Cost - Accumulated depreciation
At the end of 5th years the book value is equal to salvage value.