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 $87,000. At the end of its five-year service life. It is estimated that the van will be worth $9,000. During the five-year period, the company expects to drive the van 260,000 miles. Required: Calculate annual depreciation for the five-year life of the van using each of the following methods. 3. Units of production using miles driven as a measure of output, and the following actual mileage: (Do not round intermediate calculations.) Depreciation Year 2021 2022 2023 2024 2025 Total Milds 32,000 44,000 36,000 30,000 32,000

Answer 1

Depreciation expense per mile = ( Cost of van - residual value)/ Estimated miles

= ( 87,000-9,000)/260,000

= $0.3

Year	Miles	Depreciation
2021	32,000	32,000 x 0.3 = 9,600
2022	44,000	44,000 x 0.3 = 13,200
2023	36,000	36,000 x 0.3 = 10,800
2024	30,000	30,000 x 0.3 = 9,000
2025	32,000	32,000 x 0.3 = 9,600
Total		$52,200

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