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 $123,000. At the end of its five-year service life, it is estimated that the van will be worth $12,600. During the five-year period, the company expects to drive the van 368,000 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

Requirement 1

Depreciation Straight line $ 22,080 per year

Working

Straight line Method
A	Cost	$ 123,000
B	Residual Value	$ 12,600
C=A - B	Depreciable base	$ 110,400
D	Life [in years left ]	5
E=C/D	Annual SLM depreciation	$             22,080.00

Requirement 2

Year	Depreciation expense
2021	$ 49,200
2022	$ 29,520
2023	$ 17,712
2024	$ 10,627
2025	$ 3,341

Working

Double declining Method
A	Cost	$ 123,000
B	Residual Value	$ 12,600
C=A - B	Depreciable base	$ 110,400
D	Life [in years]	5
E=C/D	Annual SLM depreciation	$ 22,080
F=E/C	SLM Rate	20.00%
G=F x 2	DDB Rate	40.00%

.

Depreciation schedule-Double declining
Year	Beginning Book Value	Depreciation rate	Depreciation expense	Accumulated Depreciation	Ending Book Value
2021	$ 123,000	40.00%	$ 49,200	$ 49,200	$ 73,800
2022	$ 73,800	40.00%	$ 29,520	$ 78,720	$ 44,280
2023	$ 44,280	40.00%	$ 17,712	$ 96,432	$ 26,568
2024	$ 26,568	40.00%	$ 10,627	$ 107,059	$ 15,941
2025	$ 15,941	40.00%	$ 3,341	$ 110,400	$ 12,600

.

Requirement 3

Year	Depreciation expense
2021	$                   14,400
2022	$                   17,400
2023	$                   14,400
2024	$                   11,400
2025	$                   52,800

Working

Units of Production method
A	Cost	$ 123,000
B	Residual Value	$ 12,600
C=A - B	Depreciable base	$ 110,400
D	Usage in units(in Hours)	368000
E	Depreciation per hour	$ 0.30

.

Depreciation schedule-Units of Activity
Year	Book Value	Usage	Depreciation expense	Ending Book Value	Accumulated Depreciation
2021	$              123,000	48000	$                   14,400	$                  108,600	$               14,400
2022	$              108,600	58000	$                   17,400	$                    91,200	$               31,800
2023	$                91,200	48000	$                   14,400	$                    76,800	$               46,200
2024	$                76,800	38000	$                   11,400	$                    65,400	$               57,600
2025	$                65,400		$                   52,800	$                    12,600	$             110,400