Chubbyville purchases a delivery van for $24,100. Chubbyville estimates a four-year service life and a residual...

Chubbyville purchases a delivery van for $24,100. Chubbyville estimates a four-year service life and a residual value of $1,900. During the four-year period, the company expects to drive the van 104,000 miles. 1. Straight-line. 2. Double-declining-balance. (Round your depreciation rate to 2 decimal places. Round your final answers to the nearest whole dollar.) 3. Actual miles driven each year were 24,000 miles in Year 1; 32,000 miles in Year 2; 22,000 miles in Year 3; and 24,000 miles in Year 4. Note that actual total miles of 102,000 fall short of expectations by 2,000 miles. Calculate annual depreciation for the four-year life of the van using activity-based. (Round your depreciation rate to 2 decimal places. Round your final answers to the nearest whole dollar.)

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Expert Solution

1. Calculation of Depreciation Rate based on Straight Line Method

Cost of Asset	24100
Salvage Value	1900
Depreciable Value	22200
Useful Life of Asset (Years)	4
Annual Depreciation	5550
Depreciation Rate (%)	23.03%

2. Calculation of Depreciation Rate based on Double Declining Balance Method

Twice of SLM Rate = 46.06%

3.Calculation of Annual Depreciation using Activity Based Depreciation

Total Expected Km = 104000

Depreciable Value of Van = 22,200

Year	Actual Km Drive	Cumm. Km	Cumulative Depreciation	Annual Depreciation
1	24000	24000	5,123.08	5,123.08
2	32000	56000	11,953.85	6,830.77
3	22000	78000	16,650.00	4,696.15
4	24000	102000	22,200.00	5,550.00
Total				22,200.00

ekkarill92 answered 1 year ago

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