On January 1, Year 1, Phoenix Corporation purchased a delivery truck for $45,000. The estimated useful life of the truck is 5 years, with an estimated salvage value of $9,000. The truck is expected to be driven 200,000 miles during its useful life.Required:a) Phoenix uses double-declining-balance depreciation.  (1) What is the amount of depreciation for Year 1?  (2) What is the balance of the accumulated depreciation account at the end of Year 2?b) Refer to part a. Assume Phoenix used double-declining-balance depreciation and sold the truck at the beginning of Year 3 for $18,000. What is the amount of the gain or loss on the sale of the delivery van?c) Prepare the journal entry to record the sale in part (b).d) Assume that Phoenix used the units-of-production method instead. The

delivery van was driven 50,000 miles the first year and 40,000 miles the second year.  (1) What is the amount of depreciation expense for Year 1?  (2) What is the amount of depreciation expense for Year 2?  (3) What is the book value of the van at the end of Year 2?

What will be an ideal response?

a) (1) $18,000 
Double-declining-balance rate = (1 ÷ 5) × 2 = 40%
Year 1 depreciation expense = Book value at beginning of year of $45,000 × 40% = $18,000 

a)(2) $28,800 
Book value at end of Year 1 = Cost of $45,000 ? Accumulated depreciation of $18,000 = $27,000
Year 2 depreciation expense = Book value at beginning of year of $27,000 × 40% = $10,800
Accumulated Depreciation at end of Year 2 = $18,000 + $10,800 = $28,800

b)$1,800 gain
Gain on sale = Proceeds of $18,000 ? Book value at end of Year 2 of $16,200 ($45,000 ? $28,800) = $1,800 

c) 
Cash18,000?
Accumulated depreciation28,800?
  Van?45,000
  Gain on sale of van?1,800
d)(1) $9,000 Depreciation expense = [(Cost of $45,000 ? Salvage value of $9,000) ÷ Estimate of 200,000 miles × Miles driven of 50,000 = $9,000

d)(2) $7,200 
Year 2 Depreciation expense = [(Cost of $45,000 ? Salvage value of $9,000) ÷ Estimate of 200,000 miles × Miles driven of 40,000 = $7,200

d)(3) $28,800
Book value at the end of Year 2= Cost of $45,000 ? Accumulated depreciation of ($9,000 + $7,200) = $28,800

Business

You might also like to view...

A distribution of earnings by a corporation to its stockholders is known as a distribution payment

Indicate whether the statement is true or false

View
Business

The vertical distance from a point to the regression line is the squared error, ej2

Indicate whether the statement is true or false

View
Business

What are the two core types of ethical dilemma?

a. motivated and unmotivated b. action and inaction c. emotional and analytical d. conscious and unconscious

View
Business

Customer loyalty, commitment, and equity are all factors that can build ________

A) brand equity B) brand positioning C) brand alliances D) brand personality E) brand knowledge

View
Business