Wakefield Industries purchased a delivery vehicle on January 1, 2019, for $30,000. They paid sales taxes...
Wakefield Industries purchased a delivery vehicle on January 1, 2019, for $30,000. They paid sales taxes of $2,000 and one year’s insurance premium of $2,000 on the same day. The company estimated a residual value of $3,000 at the end of the 5 year expected service life.
| Expected usage (in miles) of the new delivery vehicle | |
|---|---|
| 2019 | 16,000 |
| 2020 | 22,000 |
| 2021 | 25,000 |
| 2022 | 21,000 |
| 2023 | 16,000 |
Mileage estimates were based on expected increases in customers and the addition of a second delivery vehicle in 2022.
What was depreciation expense of the vehicle in 2021 under the sum-of-the-years’-digits and double-declining balance depreciation methods, respectively?
Select one:
a. $5,800: $4,608
b. $6,200; $4,176
c. $6,400; $4,176
d. $6,200; $4,896
e. $6,800; $4,896
Homework Answers
Cost of Van = 30000+2000+2000 = 34000
Expected miles = 16000+22000+25000+21000+16000 = 100000
Double decline rate = 100/5*2 = 40%
2021 Dep under sum of year digit method = (34000-3000)*3/15 = 6200
2021 Dep under Double decline rate = 34000*60%*60%*40% = 4896
So answer is d) $6200; $4896
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