Question

linton company purchased a delivery truck for 33.000 on january 1 2017 the truck has an expected salvage value of 1,300 and is expected to be driving 109,000 miles over its esitmated useful of life of 9 years. acutal miles driving were 15,400 for 2017 and 12,500 in 2018 what is the depreication expense for 2017 and 2018 using the stright line method , the unit of activity method and the decling balance method

Answer 1

Answer:

Straight Line Depreciation Method:
Depreciation per year = (Cost – Salvage Value) / Useful Life
Depreciation per year = (33,000 – 1,300) / 9
Depreciation per year = $3,522.22

Depreciation for the year 2017 = $3,522.22
Depreciation for the year 2018 = $3,522.22

Units of Activity Method:
Depreciation per mile = (Cost – Salvage Value) / Expected mile during the life
Depreciation per mile = (33,000 – 1,300) / 109,000
Depreciation per mile = $0.29

Depreciation for the year 2017 = $0.29 * 15,400
Depreciation for the year 2017 = $4,466

Depreciation for the year 2018 = $0.29 * 12,500
Depreciation for the year 2018 = $3,625

Double Declining Balance Method:
Double Declining Depreciation Rate = 2 * Straight Line Depreciation Rate
Straight Line Depreciation Rate = 1 / Useful Life = 1/9
Double Declining Depreciation Rate = 2 * 1/9 = 2/9

Depreciation for the year 2017 = $33,000 * 2/9
Depreciation for the year 2017 = $7,333.33

Book Value at the end of Year 2017 = $33,000 - $7,333.33
Book Value at the end of Year 2017 = $25,666.67

Depreciation for the year 2018 = $25,666.67 * 2/9
Depreciation for the year 2018 = $5,703.70