Speedy Delivery Company purchases a delivery van for $41,600. Speedy estimates t

Question

Speedy Delivery Company purchases a delivery van for $41,600. Speedy estimates that at the end of its four-year service life, the van will be worth $6,000. During the four-year period, the company expects to drive the van 222,500 miles.

Actual miles driven each year were 58,000 miles in year 1 and 64,000 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.)

  
1. Straight-line.

Year Annual Depreciation

1

2

2. Double-declining-balance.

Year Annual Depreciation

1

2

   
3. Activity-based.

Year Annual Depreciation

1

2

Explanation / Answer

1.

2.

3.

Straight line Method Cost of delivary van $ 41,600 Less: residual value $    6,000 Depreciable value $ 35,600 Depreciation ($35,600 / 4) $    8,900 Depreciation expense for Year 1 $    8,900 Depreciation expense for Year 2 $    8,900

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