Question

On July 1, 2020, Molly’s Greenhouse purchased a new delivery truck for $75,000. She paid a $20,000 cash and signed a promissory note for the remainder. Molly estimates that the delivery truck will have a five-year useful life, or 175,000 kilometres and a residual value of $5,000. Molly’s Greenhouse has a December 31 year end. Molly drove the truck 14,000 km in 2020; 40,000 km in 2021; 41,000 in 2022; 39,000 in 2023, and 42,000 in 2024.. Prepare depreciation schedules for the life of the asset under the following depreciation methods: 1. straight-line method 2. double-diminishing-balance, and 3. units-of-production method

Answer 1

1)	Straight Line Method
	Cost	75000
	(-) Residual Value	5000
	Depreciable Cost	70000
	Useful Life	5	years
	Depreciation Expense	14000
Year	Depreciable	Depreciation	Accumulated	Carrying
Amount	Expense	Depreciation	Amount
2020	75000	14000	14000	61000
2021	75000	14000	28000	47000
2022	75000	14000	42000	33000
2023	75000	14000	56000	19000
2024	75000	14000	70000	5000
2)	Double Diminishing Balance Method
	Cost	75000
	Residual Value	5000
	Useful Life	5	years
	Depreciation Rate       =	1-(s/c)^1/n
		s - Scrap Value
		c- Cost of asset
		n - Estimated Life of asset
	Depreciation Rate       =	41.82%
Year	Depreciable	Depreciation	Depreciation	Accumulated	Carrying
Amount	Rate	Expense	Depreciation	Amount
2020	75,000	41.82%	31,365	31,365	43,635
2021	43,635	41.82%	18,248	49,613	25,387
2022	25,387	41.82%	10,617	60,230	14,770
2023	14,770	41.82%	6,177	66,407	8,593
2024	8,593	41.82%	3,594	70,000	5,000
3)	Units of Production Method
	Cost	75000
	(-) Residual Value	5000
	Depreciable Cost	70000
	Total KM	176000
	Depreciation per K.m	0.40
Year	Depreciable	Depreciable	Depreciation	Accumulated	Carrying
Amount	Amount/ Unit	Expense	Depreciation	Amount
Cost					75000
2020	14000	0.40	5,568	5,568	69,432
2021	40000	0.40	15,909	21,477	53,523
2022	41000	0.40	16,307	37,784	37,216
2023	39000	0.40	15,511	53,295	21,705
2024	42000	0.40	16,705	70,000	5,000