Speedy Delivery Company purchases a delivery van for $35,200. Speedy estimates t

Question

Speedy Delivery Company purchases a delivery van for $35,200. 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 182,500 miles.

Actual miles driven each year were 48,000 miles in year 1 and 54,000 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

First two year dep :

Straight line = (35200-6000/4) = 7300 per year

2) Double decline :

Straight line rate = 100/4 = 25%

Double decline rate = 25*2 = 50%

3) Activity based :

Dep per mile = (35200-6000/182500) = 0.16 per mile

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