Problem 1

ABC Company acquires a delivery truck at a cost of $50,000. The truck is expected to have a
salvage value of $5,000 at the end of its 5-year useful life. Compute annual depreciation expense
for the fi rst and second years using (a) the straight-line method and (b) double-declining
balance.

Problem 2
ABC Company purchased a new machine on October 1, 2020, at a cost of $145,000. The
company estimated that the machine will have a salvage value of $25,000. The machine is
expected to be used for 20,000 working hours during its 5-year life. Compute the depreciation
expense under the following methods for the year indicated.
a. Straight-line for 2020.
b. Units-of-activity for 2020, assuming machine usage was 3,400 hours.
c. Declining-balance using double the straight-line rate for 2020 and 2021.

Problem 3
ABC Company purchases a factory machine at a cost of $18,000 on January 1, 2020. ABC
expects the machine to have a salvage value of $2,000 at the end of its 4-year useful life. During
its useful life, the machine is expected to be used 160,000 hours. Actual annual hourly use was
2020, 40,000; 2021, 60,000; 2022, 35,000; and 2023, 25,000. Prepare depreciation schedules for
the following methods: (a) straight-line, (b) units-of-activity, and (c) declining-balance using
double the straight-line rate.

Problem 4
On January 1, 2020, ABC Corporation purchased a new snow-grooming machine for $50,000.
The machine is estimated to have a 10-year life with a $2,000 salvage value. What journal entry
would ABC Corporation make at December 31, 2020, if it uses the (a) straight-line and (b)
declining-balance method of depreciation?

Problem 5
ABC Company purchases a factory machine at a cost of $13,000 on January 1, 2020. ABC
expects the machine to have a salvage value of $1,000 at the end of its 5-year useful life.
During its useful life, the machine is expected to be used 100,000 hours. Actual annual hourly
use was 2019, 15,000; 2020, 30,000; 2021, 20,000; 2022, 25,000; and 2023, 10,000. Prepare
depreciation schedules for the following methods: (a) straight-line, (b) units-of-activity, and (c)
declining-balance using double the straight-line rate.

Problem 6
Assumed a fixed asset purchased for $130,000 was originally estimated to have a useful life of
30 years and a residual value of $10,000. The asset has been depreciated for 10 years by the
straight line method. At the end of ten years, the asset’s book value of $90,000. During 11th
year, it is estimated that the remaining useful life is 25 years and that the residual value is
$5,000. Compute depreciation expense for the 11th year using the new information provided.