Linton Company purchased a delivery truck for $33,000 on January 1, 2017. The tr

Question

Linton Company purchased a delivery truck for $33,000 on January 1, 2017. The truck has an expected salvage value of $1,900, and is expected to be driven 108,000 miles over its estimated useful life of 8 years. Actual miles driven were 16,000 in 2017 and 11,300 in 2018.

Calculate depreciation expense per mile under units-of-activity method

Compute depreciation expense for 2017 and 2018 using (1) the straight-line method, (2) the units-of-activity method, and (3) the double-declining-balance method

Please, do not give only the correct answer but also how that answer was arrived at. Thanks

Explanation / Answer

Depreciation under SLM : (Cost -salvage) /useful life in years

                          = (33000 - 1900) / 8

                            = 31100/8

                           = 3887.5

2017 = 3887.5

2018 = 3887.5

2)Units of activity :Depreciation per mile = (33000 - 1900) / 108000

                                                     = $ .2880 per mile

2017 = 16000 *.2880 = $ 4608

2018 = 11300 *.2880 = $ 3254.4

3)Double decliningmethod :Rate = 2 /useful life in years = 2/ 8 = .25

2017 = (cost -accumulated depreciation ) *rate

            = (33000-0) *.25 = 33000*.25 = $ 8250

2018 = (33000-8250)*.25

          = 24750*.25 = $ 6187.5

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