CC10 COOKIE CREATIONS
(a) Purchase price …………………………………………………… $36,500
Painting …………………………………………………………………… 2,500
(b) Straight-line depreciation
Depreciable Deprec. Deprec. Accum. Net Book
Year Cost X Rate = Expense Deprec. Value
$40,500
2017 $33,000* 20% X 4/12 $2,200 $ 2,200 38,300
2018 33,000 20% 6,600 8,800 31,700
2019 33,000 20% 6,600 15,400 25,100
Units-of activity depreciation
Units of Deprec. Deprec. Accum. Net Book
Year Activity X Cost/Unit = Expense Deprec. Value
$40,500
2017 15,000 $0.165* $ 2,475 $ 2,475 38,025
2018 45,000 0.165 7,425 9,900 30,600
CC10 (Continued)
(c) Impact on Cookie Creation’s balance sheet and income statement
in 2017:
Double
declining Units-of–
Straight-Line Balance Activity
Cost of asset $40,500 $40,500 $40,500
Accumulated depreciation 2,200 5,400 2,475
Net book value $38,300 $35,100 $38,025
(d) Over the van’s 5-year useful life, the total depreciation will be $33,000
(resulting in a net book value equal to the salvage value of $7,500) under
(e) The units-of-activity method may provide Natalie with a more accurate
assessment of usage of the van in relation to the amount of revenue