Question

Required information [The following information applies to the questions displayed below.] On January 1, 2021, the Excel Delivery Company purchased a delivery van for $75,000. At the end of its five-year service life, it is estimated that the van will be worth $7,800. During the five-year period, the company expects to drive the van 224,000 miles. Required: Calculate annual depreciation for the five-year life of the van using each of the following methods. 1. Straight line. Straight-line per year

Answer 1

Cost of Asset 75000 Residual Value 7800 Useful Life Depreciable Asset = Cost - Residual value Depreciable Asset 67200 Depreciation p.a = Depreciable asset / Useful Life Depreciation p.a = 13440 Year 2021 2022 2023 2024 2025 Total Straight line Method Depreciation Accumulated expenses Depreciaton Book value 13,440 $ 13,440 $ 61,560 13,440 $ 26,880 $ 48,120 13,440 $ 40,320 $ 34,680 13,440 $ 53,760 $ 21,240 13,440 $ 67,200 $ 7,800 $ 67,200 $ 67,200 $ 7,800

Depreciation rate = ( 1*200 /useful life ) = 40% Double Decline Method Year 2021 S20 2022 Book value at Accumulate Beginning of the Depreciation Depreciation d year rate expenses Depreciaton Book value 75,000 40.00% 30,000$ 30,000 $ 45,000 45,000 40.00% 18,000 $ 48,000 $ 27,000 $ 27,000 40.00% 10,800 $ 58,800 $ 16,200 16,200 40.00% $ 6,480 $ 65,280$ 9,720 $ 9,720 19.75% 1,920 $ 67,200 $ 7,800 | $ 67,200 $ 67,200 $ 7,800 2023 2024 2025 Total

Cost of Asset 75000 Residual Value 7800 Total production/hours 224000 Depreciable Asset = Cost - Residual value Depreciable Asset 67200 Depreciation per mile = Depreciable asset / Production units(hours) Depreciation per mile = 0.30 Year 2021 2022 2023 2024 2025 Units of Output / Activity Depreciable Depreciation Depreciation Accumulated Miles miles per mile = expenses Depreciaton Book value 36000 36000 $ 0.30 $ 10,800 $ 10,800 $ 64,200 40000 40000 $ 0.30 $ 12,000 $ 22,800 $ 52,200 21000 21000 $ 0.30 $ 6,300 $ 29,100 $ 45,900 28000 28000 $ 0.30 $ 8,400 $ 37,500 $ 37,500 32000 32000 $ 0.30 $ 9,600 $ 47,100 $ 27,900 157000 157000 $ 0.30 $ 47,100 $ 47,100 $ 27,900 Total