17. Mohamed Company purchased a delivery truck for $30,000 on January 1, 2012. The truck has an expected salvage value of $2,000, and is expected to be driven 100,000 miles over its estimated useful life of 8 years. Actual miles driven were 15,000 in 2012 and 12,000 in 2013. Instructions (a) Compute depreciation expense for 2012 and 2013 using (1) the straight-line method, (2) the units-of-activity method, and (3) the double-declining-balance method. (b) Assume that Mohamed uses the straight-line method. (1) Prepare the journal entry to record 2012 depreciation. (2) Show how the truck would be reported in the December 31, 2012, balance sheet. 18. The Fahim Company at December 31 has cash $20,000, noncash assets $100,000, liabilities $55,000, and the following capital balances: Ahmed $45,000 and Bader $20,000. The firm is liquidated, and $110,000 in cash is received for the noncash assets. Ahmed and Bader income ratios are 60% and 40%, respectively. Instructions Prepare a schedule of cash payments.
17. Mohamed Company purchased a delivery truck for $30,000 on January 1, 2012. The truck has an expected salvage value of $2,000, and is expected to be driven 100,000 miles over its estimated useful life of 8 years. Actual miles driven were 15,000 in 2012 and 12,000 in 2013. Instructions (a) Compute depreciation expense for 2012 and 2013 using (1) the straight-line method, (2) the units-of-activity method, and (3) the double-declining-balance method. (b) Assume that Mohamed uses the straight-line method. (1) Prepare the journal entry to record 2012 depreciation. (2) Show how the truck would be reported in the December 31, 2012, balance sheet. 18. The Fahim Company at December 31 has cash $20,000, noncash assets $100,000, liabilities $55,000, and the following capital balances: Ahmed $45,000 and Bader $20,000. The firm is liquidated, and $110,000 in cash is received for the noncash assets. Ahmed and Bader income ratios are 60% and 40%, respectively. Instructions Prepare a schedule of cash payments.
Chapter11: Long-term Assets
Section: Chapter Questions
Problem 8PB: Montello Inc. purchases a delivery truck for $25,000. The truck has a salvage value of $6,000 and is...
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Depreciation Methods
The word "depreciation" is defined as an accounting method wherein the cost of tangible assets is spread over its useful life and it usually denotes how much of the assets value has been used up. The depreciation is usually considered as an operating expense. The main reason behind depreciation includes wear and tear of the assets, obsolescence etc.
Depreciation Accounting
In terms of accounting, with the passage of time the value of a fixed asset (like machinery, plants, furniture etc.) goes down over a specific period of time is known as depreciation. Now, the question comes in your mind, why the value of the fixed asset reduces over time.
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