Question

Swifty Company purchased a delivery truck for $26,000 on January 1, 2020. The truck has an expected salvage value of $1,000, and is expected to be driven 100,000 miles over its estimated useful life of 10 years. Actual miles driven were 12,800 in 2020 and 12,000 in 2021.

Calculate depreciation expense per mile under units-of-activity method. (Round answer to 2 decimal places, e.g. 0.50.)

Depreciation expense

$

per mile

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List of Accounts

Compute depreciation expense for 2020 and 2021 using (1) the straight-line method, (2) the units-of-activity method, and (3) the double-declining-balance method. (Round depreciation cost per unit to 2 decimal places, e.g. 0.50 and depreciation rate to 0 decimal places, e.g. 15%. Round final answers to 0 decimal places, e.g. 2,125.)

				Depreciation Expense
				2020		2021
(1)		Straight-line method		$		$
(2)		Units-of-activity method		$		$
(3)		Declining-balance method		$		$

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Assume that Swifty uses the straight-line method. Prepare the journal entry to record 2020 depreciation. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Round answers to 0 decimal places, e.g. 2,125.)

Account Titles and Explanation	Debit	Credit

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Assume that Swifty uses the straight-line method. Show how the truck would be reported in the December 31, 2020, balance sheet. (Round answers to 0 decimal places, e.g. 2,125.)

SWIFTY COMPANY Partial Balance Sheet                                                                       December 31, 2020For the Month Ended December 31, 2020For the Year Ended December 31, 2020
			$
AddLess:
			$

Answer 1

Calculation of depreciable value : Cost of the truck - salvage value

= 26,000-1,000 = 25,000

a) depreciation per mile under units of activity method

depreciation per unit of activity(i.e per mile) = depreciable value/expected miles

= 25,000/100,000 = $0.25/mile

(For calculating depreciation we will multiply depreciation per unit of activity with actual number of activity)

b) i) Calculation of depreciation for straight line method

Depreciation per year = Depreciable value/Estimated useful of the asset

= 25,000/10 = $2,500 per year

ii) Calculation of rate of depreciation under double declining balance method

Step 1 : Divide 100% by useful life of the asset

= 100%/10 = 10%

Step 2 : Multiply the rate with 2

= 10%*2 = 20% (rate of depreciation under double declining balance method)

Computation of depreciation under different methods

Depreciation method	Depreciation expense (2020)	Depreciation expense (2021)
Straight line method	2,500	2,500
Units of activity method	12,800*0.25 = 3,200	12,000*0.25 = 3,000
Double declining balance method	26,000*20% = 5,200	(26,000-5200)*20% = 4,160

c) Journal entry

Dr Depreciation expense A/c 2,500

Cr Accumulated depreciation A/c 2,500

d )

Swift Company

Partial balance sheet

December 31, 2020 For the Year ended December 31, 2020

Truck	$26,000
Less : Accumulated depreciation	($ 2,500)	$23,500