Question

E9.7 (LO 2) Linton Company purchased a delivery truck for $34,000 on January 1, 2020. The truck has an expected salvage value of $2,000, and is expected to be driven 100,000 miles over its estimated useful life of 8 years. Actual miles driven were 15,000 in 2020 and 12,000 in 2021. Compute depreciation using different methods. Instructions . Compute depreciation expense for 2020 and 2021 using (1) the straight-line method, (2) the units- of-activity method, and (3) the double-declining-balance method.

Answer 1

a.

Straight line method:

Depreciation expense per year = $34,000-2,000 / 8 = $4,000

Depreciation for 2020 and 2021 = $4,000

Units of activity method:

Depreciation expense for 2020 = $34,000-2,000 / 100,000*15,000 = $4,800

Depreciation expense for 2021 = $34,000-2,000 / 100,000*12,000 = $3,840

Double declining balance method:

Depreciation rate = 100/8 * 2 = 25%

Depreciation expense for 2020 = $34,000*25% = $8,500

Depreciation expense for 2021 = $(34,000-8,500)* 25% = $6,375

b.

General Journal	Debit	Credit
Depreciation expense	$4,000
Accumulated depreciation		$4,000

LINTON COMPANY Balance Sheet (Partial) December 31, 2020
Property, plant and equipment:
Vehicle	$34,000
Less: Accumulated depreciation	4,000
		$30,000