2. on January 1, 2007, you purchase a semi-hauler truck for $105,000. You expect
ID: 2575682 • Letter: 2
Question
2. on January 1, 2007, you purchase a semi-hauler truck for $105,000. You expect it to last either ten years or 40 0,000 miles. At the end of its useful life, you think that you can sell the truck for $5,000. The following is a Scale for the actual mileage the truck is driven: Year 1. 2 3. 4. 5. Miles Year Miles 65,0006 35,000 7. 8. 9. 30,000 45,000 45,000 45,000! 10- -25,000 Compute depreciation expense under the following methods: a. Straight-line b. Units of production. c. Double-declining balance.Explanation / Answer
1 Straight Line Method Purchase Price 105,000.00 Life 10 Years Salvage Value 5000 Depreciation (Purchase Price-Salvage Value)/Life Depreciation (105000-5000)/10 Depreciation 10000 2 Units of Productio method Total Distance Covered-Expected 400000 Distance Covered in Year 2007 65000 Depreciation 2007 (Distance Covered in 2007/Total Estimated distance covered in entire life)*(Cost-Salvage Value) Depreciation 2007 (65000/400000)*(105000-5000) Depreciation 2007 16250 3 Double Declining Balance Rate of Depreciation(In SLM method) 10% Rate of Depreciation (In Double Declining Method) 2*Rate of Depreciation(As per SLM Method) Rate of Depreciation (In Double Declining Method) 2*10% Rate of Depreciation (In Double Declining Method) 20.00% Depreciation-2007 100,000*20% Depreciation-2007 20000
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