BACT105 Business Accounting

Question BE 10-2

Expenditures in regards to purchase the truck

Cash price = $30,000

Accident insurance = $2,000

Sale taxes = $2,100

Motor vehicle license = $100

Painting and lettering = $400

Cost of truck =?

Cost of truck

Hence, the cost of truck would be $32,500. 

Question BE 10- 3

Flaherty Company’s journal entries for the two transactions are shown below: 

Question BE 10-4

Depreciation through straight line method

Straight depreciation = (38000-6000)/4 = $ 8000 per year

Question BE 10-6

Depreciation through double declining method

Straight line depreciation rate = 100 / 4 = 25%

Double decline rate = 2*25% = 50%

First year depreciation = $38000*50% = $19,000

Second year depreciation = $19000*50% = $9,500 

Question BE 10-7

Depreciation rate = (39500-500)/150000 = 0.26 per mile

First year depreciation = $30000*0.26 = $7,800

Second year depreciation = $20000*0.26 = $5,200 

Question E 10-6

• Depreciation expense for 2017 through straight line method

Annual depreciation = ($150,000 - $12,000)/5 = $27,600

Depreciation expense for 2017 = 27,600 * (3/12) = $6,900 

• Depreciation for 2017 through units of activity method

Depreciation per hour = ($150,000 - $12,000)/10000 = $13.8 per hour

Depreciation for 2017 = 13.8 * 1700 = $23,460 

• Depreciation for 2017 through double declining balance method
• Depreciation expense for 2017

Straight line depreciation rate = 100 * (1/5) = 20%

Depreciation expense for first year [Oct’17 to Oct’18] = 2*20%*$150,000 = $60,000

Depreciation expense for first year [Oct’17 to Oct’18] = 2*20% *($150,000 -$60000) = $36,000

Hence,

Depreciation expense for 2017 =$60000 *(3/12) = $15,000 

• Depreciation expense for 2018

Depreciation expense [Jan’17 to Sept’18] = $60,000 *(9/12) = $45,000

Depreciation expense [Oct’18 to Dec’18] = $36000 * (3/12) = $9,000

Depreciation expense for 2018 = $45,000 + $9,000 = $54,000 

 Question E 10- 7

• Depreciation expense for 2017 and 2018 

• Straight line method (SLM)

Depreciation expense (SLM) = ($34,000 -$2,000)/8 = $4,000

Depreciation expense on delivery truck through SLM for year 2017 is $4,000 and for year 2018 is $4,000.

• Units of activity method

Depreciation expense on delivery truck through units of activity method for year 2017 is $4,800 and for year 2018 is $3,840. 

• Double declining balance method

Double declining balance rate = 2* ((100%)/ (8 year)) = 25% 

• Let Linton has used straight line method (SLM) 

• Journal entry to record depreciation for year 2017
• Amount of delivery truck that would be recorded on December 31, 2017.

 Question E 10-8

• Revised annual depreciation for each asset for the year 2017