Question

Required information Exercise 7-11A Determine depreciation under three methods (LO7-4) The following information applies to the questions displayed below Speedy Delivery Company purchases a delivery van for $33,600. Speedy estimates that at the end of its four-year service life, the van will be worth $5,200. During the four-year period, the company expects to drive the van 177,500 miles. Actual miles driven each year were 46,000 miles in year 1 and 51,000 miles in year 2 Required: Calculate annual depreciation for the first two years of the van using each of the following methods. (Do not round your intermediate calculations.) Exercise 7-11A Part 2 2. Double-declining-balance Annual Year Depreciation

Answer 1

ANSWER = 1
	CALCULATION OF THE DEPRECIATION AS PER DOUBLE DECLINE METHOD FOR VAN
	Purchase Cost of Deilvery VAN	33,600
	Useful Life =	4 years
	Depreciation per year =	8,400
	(Purchase price / Useful life)
	Rate of Depreciation =
	Rate of Depreciation = (1 / 4 Years )	0.25 or 25.00%
	(Depreication / Purchase price )
	Double decline deprection rate = 25% * 2 =	50.0%
	Depreciation for the year 1 =
	Purchase Value	$                     33,600
	Depreciation for the year 1 @ 50.00% =	$                     16,800
	Closing Value of year 1	$                     16,800
	Opening Balance of the year 2	$                     16,800
	Depreciation for the year 2 @ 50.00% =	$                        8,400
	Closing Value of year 2	$                        8,400
	Answers:	Annual Depreciation
	YEAR 1	$                     16,800
	YEAR 2	$                        8,400
ANSWER = 2
	CALCULATION OF THE DEPRECIATION AS PER ACTIVITY BASED
	Purchase Cost of van	$               33,600.00
	Less: Salvage Value	$                  5,200.00
	Net Value for Depreciation	$               28,400.00
	Expected to Drive the VAN in miles	1,77,500.00	Miles
	Depreciation per Hours =	$                          0.16	Per Miles
	($ 28,400 / 177,500 Units)
	Depreciation for Year 1 = (46,000 Miles * $ 0.16)	$                        7,360
	Depreciation for Year 2 = (51,000 Miles * $ 0.16)	$                        8,160
	Answers:	Annual Depreciation
	YEAR 1	$                        7,360
	YEAR 2	$                        8,160