Question

Chubbyville purchases a delivery van for $23,100. Chubbyville estimates that at the end of its four-year service life, the van will be worth $1,900. During the four-year period, the company expects to drive the van 109,000 miles. Calculate annual depreciation for the four year life of the van using straight line, double declining, and activity based.

1. Straight Line Method

What is Depreciation expense?

2. Double Declining Balance

Year	Depreciation Expense	Accumulated Depreciation	Book Value
1
2
3
4
Total

3. Activity Based

Actual miles driven each year were...

19,000 miles in Year 1

31000 miles in Year 2

21000 miles in Year 3

25000 miles in Year 4

Note that actual total miles of 96,000 fall short of expectations by 13,000 miles.

Year	Depreciation Expense	Accumulated Depreciation	Book Value
1
2
3
4
Total

PLEASE, SHOW YOUR CALCULATION!

I need to know how to calculate each of them. You may just send the picture of your note. You don't have to type each calculation.

Answer 1

Answer 1:

Depreciation (as per SLM) = (Cost - salvage value) / Number of years

Working notes:

A	Cost	$    23,100
B	Residual / Salvage Value	$       1,900
C	Number of years	4
(A-B)/C	Depreciation (SLM)	$       5,300

Answer 2:

Depreciation Rate (as per double declining method) = 100 / Years * 2

Working Notes:

A	Cost	$    23,100
C	Number of years	4
(100/C*2) =D	Depreciation Rate (Double declining method)	50%

and,

Year	Value at the beginning	Depreciation every year	Accumulated depreciation	Value at the end
1	$                         23,100	$                            11,550	$                                 11,550	$              11,550
2	$                         11,550	$                              5,775	$                                 17,325	$                5,775
3	$                           5,775	$                              2,888	$                                 20,213	$                2,888
4	$                           2,888	$                              1,444	$                                 21,656	$                1,444

Answer 3:

Depreciation rate (as per Units of production method) = (Cost - salvage value) / Total expected units

A	Cost	$    23,100
B	Residual / Salvage Value	$       1,900
C	Expected Number of units	1,09,000
(A-B)/C	Depreciation Rate	$         0.19

and,

Actual usage	Year	Value at the beginning	Depreciation every year	Accumulated depreciation	Value at the end
19000	1	$                         23,100	$                              3,695	$                                   3,695	$              19,405
31000	2	$                         19,405	$                              6,029	$                                   9,725	$              13,375
21000	3	$                         13,375	$                              4,084	$                                 13,809	$                9,291
25000	4	$                           9,291	$                              4,862	$                                 18,672	$                4,428

In case of any doubt, please comment.