Question

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work A Saved Required information (The following information applies to the questions displayed below] Three different companies each purchased trucks on January 1, 2018, for $80,000. Each truck was expected to last four years or 250,000 miles. Salvage value was estimated to be $4,000. All three trucks were driven 78,000 miles in 2018 55,000 miles in 2019,50,000 miles in 2020, and 70,000 miles in 2021. Each of the three companies earned $69,000 of cash revenue during each of the four years. Company A uses straight-line depreciation, company B uses double-declining- balance depreciation, and company Cuses units-of-production depreciation Answer each of the following questions. Ignore the effects of income taxes 0-1. Calculate the book value on the December 31, 2020, balance sheet? (Round "Per Unit Cost" to 3 decimal places.) Book Value Company A Company B Company C < Prev so 7 or 10 m Next >

Answer 1

Answer -

	Book Value
Company A	$23000
Company B	$10000
Company C	$24368

Calculation:

1. Company A:

Under straight-line method:

Depreciation expense (annual) = (Cost of assets - Salvage value) / Useful life

= ($80000 - $4000) / 4 years

= $19000

Under straight-line deprecation method depreciation expense are same for every year till the useful life of asset.

So,

Accumulated depreciation on December 31, 2020 (For 3 years) = Annual depreciation expense * 3 years

= $19000 * 3 years

= $57000

Therefore,

Book value of assets on the December 31, 2020 = Beginning cost of assets - Accumulated depreciation

= $80000 - $57000

= $23000

2. Company B:

Under double-declining-balance method:

a. Year 1 (From Jan. 1, 2018 to Dec. 31, 2018):

Depreciation expense (Year 1) = [2 * (Cost of assets - Accumulated depreciation)] / Useful life

= [2 * ($80000 - $0)] / 4 years

= $40000

Accumulated depreciation (For 1 years) = $40000

b. Year 2 (From Jan. 1, 2019 to Dec. 31, 2019):

Depreciation expense (Year 2) = [2 * (Cost of assets - Accumulated depreciation)] / Useful life

= [2 * ($80000 - $40000)] / 4 years

= $20000

Accumulated depreciation (For 2 years) = $40000 + $20000 = $60000

c. Year 3 (From Jan. 1, 2020 to Dec. 31, 2020):

Depreciation expense (Year 3) = [2 * (Cost of assets - Accumulated depreciation)] / Useful life

= [2 * ($80000 - $60000)] / 4 years

= $10000

Accumulated depreciation (For 3 years) = $40000 + $20000 + $10000 = $70000

Therefore,

Book value of assets on the December 31, 2020 = Beginning cost of assets - Accumulated depreciation

= $80000 - $70000

= $10000

3. Company C:

Under units-of-production method:

a. Year 1 (From Jan. 1, 2018 to Dec. 31, 2018):

Depreciation expense (Year 1) = [(cost of assets - Salvage value) / Estimated total miles driven] * Actual miles driven

= [($80000 - $4000) / 250000 miles] * 78000 miles

= $23712

Accumulated depreciation (For 1 years) = $23712

b. Year 2 (From Jan. 1, 2019 to Dec. 31, 2019):

Depreciation expense (Year 2) = [(cost of assets - Salvage value) / Estimated total miles driven] * Actual miles driven

= [($80000 - $4000) / 250000 miles] * 55000 miles

= $16720

Accumulated depreciation (For 2 years) = $23712 + $16720 = $40432

c. Year 3 (From Jan. 1, 2020 to Dec. 31, 2020):

Depreciation expense (Year 3) = [(cost of assets - Salvage value) / Estimated total miles driven] * Actual miles driven

= [($80000 - $4000) / 250000 miles] * 50000 miles

= $15200

Accumulated depreciation (For 3 years) = $23712 + $16720 + $15200 = $55632

Therefore,

Book value of assets on the December 31, 2020 = Beginning cost of assets - Accumulated depreciation

= $80000 - $55632

= $24368