Question

Prepare a depreciation schedule using the straight-line method for the used suburban purchased by Tony and Suzie for 12,600 on July 1, 2025. They expect to use the vehicle for five years and then sell it for4,800. The following expenditures were also made on July 1, 2025: 1,950 for a one-year insurance policy,3,600 for repainting the vehicle and placing the Great Adventures logo, and 2,150 for a deluxe roof rack and trailer hitch. Additionally, on October 22, 2025,700 was spent on basic vehicle maintenance.

Answer 1

To prepare a depreciation schedule using the straight-line method, we need to calculate the annual depreciation expense. Expenses on insurance, repainting, and accessories should be allocated over the vehicle's useful life. Basic vehicle maintenance should be allocated from October 22, 2025, until the end of the useful life. The depreciation schedule shows the yearly depreciation expense and allocated expenses.

Step-by-step explanation:

To prepare a depreciation schedule using the straight-line method, we need to determine the annual depreciation expense. The formula for straight-line depreciation is: (Cost - Residual value) / Useful life. In this case, the cost of the suburban is $12,600 and the residual value is $4,800. The useful life is 5 years. Therefore, the annual depreciation expense is ($12,600 - $4,800) / 5 = $1,560.

Next, we will allocate the expenses made on July 1, 2025, over the useful life of the vehicle. The expenditures on insurance, repainting, and logo placement, and the roof rack and trailer hitch should be divided equally over the 5-year period. The expense on basic vehicle maintenance should be allocated from October 22, 2025, until the end of the useful life.

Here is the depreciation schedule:

Year
Depreciation Expense
Allocated Expenses


2025
-
$0


2026
$1,560
$940 ($1,950 / 5)


2027
$1,560
$940


2028
$1,560
$940


2029
$1,560
$940


2030
$1,560
$940


Total
$7,800
$4,700 ($3,600 + $2,150 + $700)