Question

Bar Delivery Company purchased a new delivery truck for $36,000 on April 1, 2019. The truck is expected to have a service life of 5 years or 120,000 miles and a residual value of $3,000. The truck was driven 10,000 miles in 2019 and 18,000 miles in 2020. Bar computes depreciation expense to the nearest whole month.

1. Compute depreciation expense for 2019 and 2020 using the following methods: (Round your answers to the nearest dollar.)
   1. Straight-line method

      2019	$
      2020	$

   2. Sum-of-the-years'-digits method

      2019	$
      2020	$

   3. Double-declining-balance method

      2019	$
      2020	$

   4. Activity method

      2019	$
      2020	$

2. For each method, what is the book value of the machine at the end of 2019? At the end of 2020? (Round your answers to the nearest dollar.)
   1. Straight-line method

      2019	$
      2020	$

   2. Sum-of-the-years'-digits method

      2019	$
      2020	$

   3. Double-declining-balance method

      2019	$
      2020	$

   4. Activity method

      2019	$
      2020	$

3. Next Level The book value of the asset in the early years of the asset's service will be lower  under an accelerated method as compared to the straight-line method. The sum-of-the-years-digits  method is appropriate when the service life of the asset is affected primarily by the amount the asset is used.

Answer 1

Cost	36,000
Residual value	3,000
Life	5
Miles	120,000
Straight line method
Depreciation for 2019 = (36,000-3,000)/5 * 9/12	4,950
Depreciation for 2020 = (36,000-3,000)/5	6,600
Sum of years digit method
Sum of years = 1+2+3+4+5	15
Depreciation for 2019 = (36,000-3,000)*5/15 * 9/12	8,250
Depreciation for 2020 = (36,000-3,000)*4/15	8,800
Double declining balance method: 2*Straight line depreciation rate*Book value at the beginning of the year
Straight line depreciation rate = Depreciation for year / (costof asset - residual value)
6600/ (36,000-3,000) = 20%
Depreciation for 2019 = 2*20%*36,000*9/12	10,800
Depreciation for 2020 = 2*20%*(36,000-10,800)	10,080
Activity method : Depreciation per mile = (Cost of the asset -salvage value)/ Estimated miles
Depreciation per mile = (36,000-3,000)/120,000	0.275	per mile
Depreciation for 2019 = 10,000*.275	2,750
Depreciation for 2020 = 18,000*0.275	4,950
Cost = 36,000	Depreciation	Book value
Straight line method
Depreciation for 2019 = (36,000-3,000)/5*9/12	4,950	31,050
Depreciation for 2020 = (36,000-3,000)/5	6,600	24,450
Sum of years digit method
Depreciation for 2019 = (36,000-3,000)*5/15*9/12	8,250	27,750
Depreciation for 2020 = (36,000-3,000)*4/15	8,800	18,950
Double declining balance method
Depreciation for 2019 = 2*20%*36,000*9/12	10,800	25,200
Depreciation for 2020 = 2*20%*(36,000-10,800)	10,080	15,120
Activity method
Depreciation for 2019 = 10,000*.275	2,750	33,250
Depreciation for 2020 = 18,000*0.275	4,950	28,300