Chubbyville purchases a delivery van for $23,200. Chubbyville estimates that at
ID: 2444638 • Letter: C
Question
Chubbyville purchases a delivery van for $23,200. Chubbyville estimates that at the end of its four-year service life, the van will be worth $2,000. During the four-year period, the company expects to drive the van 100,000 miles.
1. Straight Line
2.
Double-declining-balance. (Round your depreciation rate to two decimal places, round other intermediate calculations and final answers to the nearest dollar amount. Omit the "$" sign in your response.)
3.Activity-based. Actual miles driven each year were 29,000 miles in Year 1; 31,000 miles in Year 2; 23,000 miles in Year 3; and 21,000 miles in Year 4. Note that actual total miles of 104,000 fall short of expectations by -4,000 miles. Calculate annual depreciation for the four-year life of the van using each of the following methods. (Round your depreciation rate per unit to two decimal places and final answers to the nearest dollar amount. Omit the "$" sign in your response.)
Double-declining-balance. (Round your depreciation rate to two decimal places, round other intermediate calculations and final answers to the nearest dollar amount. Omit the "$" sign in your response.)
Explanation / Answer
Chubbyville purchases a delivery van for $23,200. Chubbyville estimates that at the end of its four-year service life, the van will be worth $2,000. During the four-year period, the company expects to drive the van 100,000 miles.
Calculate annual depreciation for the four-year life of the van using each of the following methods. (Round your depreciation rate per unit to two decimal places and final answers to the nearest dollar amount. Omit the "$" sign in your response.)
1. Straight Line
Annual Depreciation = (Cost - salvage Value)/Useful life
Annual Depreciation = (23200-2000)/4
Annual Depreciation = $ 5300
2. Double-declining-balance. (Round your depreciation rate to two decimal places, round other intermediate calculations and final answers to the nearest dollar amount. Omit the "$" sign in your response.)
Depreciation Rate = 1/4*2 = 50%
Depreciation in Year 1 = 23200*50% = $ 11600
Book Value at Year 1= 23200-11600 = 11600
Depreciation in Year 2 = 11600 *50% = 5800
Book Value at Year 2= 11600-5800 = 5800
Depreciation in Year 3 = 5800*50% = 2900
Book Value at Year 3= 5800- 2900 = 2900
Depreciation in Year 4 = 900
3.Activity-based. Actual miles driven each year were 29,000 miles in Year 1; 31,000 miles in Year 2; 23,000 miles in Year 3; and 21,000 miles in Year 4. Note that actual total miles of 104,000 fall short of expectations by -4,000 miles.
Depreciation rate per mile = (23200-2000)/100000
Depreciation rate per mile = 0.212
Depreciation in year 1 = 29000*0.212 = 6148
Depreciation in year 2 = 31000*0.212 = 6572
Depreciation in year 3 = 23000*0.212 = 4876
Depreciation in year 4 = 17000*0.212 = 3604
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