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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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