Question

Depreciation Methods A delivery truck costing $24,000 is expected to have a $2,000 salvage value at the end of its useful life of four years or 125,000 miles. Assume that the truck was purchased on January 2. Calculate the depreciation expense for the second year using each of the following depreciation methods: (a) straight-line, (b) double-declining balance, and (c) units of production (Assume that the truck was driven 28,000 miles in the second year.) Round all answers to the nearest dollar a. Straight-line b. Double-declining balance 5 Units of production S

Answer 1

Solution for -1

Depreciation as per SLM= (Cost- Salvage Value)/ Useful Life

(24000-2000)/4= $5500

Depreciation for Second year will be : $5500

Depreciation as per DDB= ( Original Cost X DDDB Depreciaton rate)

DDB Rate= 1/ No of Useful lifeX 2

=1/4*2=50%

Depreciation For first year= 24000*50%=12000

Depreciation for second year= (24000-12000)X 50%

=$6000

Depreciation as per Unit of activity = (Cost- Salvage Value) / Total Expected Unit of ProductionX Unit Produced

((24000-2000)/125000) X 28000= $4928

Solution for -2

Depreciation as per SLM= (Cost- Salvage Value)/ Useful Life

(25000-1500)/4= $5875

Depreciation for Second year will be : $5875

Depreciation as per DDB= ( Original Cost X DDDB Depreciation rate)

DDB Rate= 1/ No of Usefule lifeX 2

=1/4*2=50%

Depreciation For first year= 25000*50%=12500

Depreciation for second year= (25000-12500)X 50%

=$6250

Depreciation as per Unit of activity = (Cost- Salvage Value) / Total Expected Unit of Production X Unit Produced

((25000-1500)/125000) X 28000= $5264