Chapter 11: Depreciation, Depletion, Impairment, and Disposal

The company uses the straight-line depreciation method for depreciable assets. All assets are depreciated individually, except manufacturing machinery, which is depreciated by the composite method.During the year, Portland exchanged a delivery truck with Maine Co. for a larger delivery truck. It paid cash equal to 10% of the larger trucks value.

Required:

1. Explain the factors that should influence Portlands selection of the straight-line depreciation method.
2. Explain how Portland should account for and report the truck exchange transaction.
3. What benefits should Portland derive from using the composite method rather than the individual basis for manufacturing machinery?
4. How should Portland calculate the manufacturing machinerys annual depreciation expense in its first year of operation?