Question

On January 1, Speedy Delivery Company purchases a delivery van for $90,000. Speedy estimates that at the end of its six-year service life, the van will be worth $30,000. During the six-year period, the company expects to drive the van 200,000 miles.

Actual miles driven each year were 32,000 miles in year 1 and 35,000 miles in year 2.


Required:

Calculate annual depreciation for the first two years using each of the following methods. (Do not round your intermediate calculations.)

Answer 1

The annual depreciation for the first two years using each method is $10,000.

Step-by-step explanation:

To calculate the annual depreciation for the first two years using each of the given methods, we need to first calculate the annual depreciation expense.

We can use the formula:

Annual depreciation expense = (Initial cost - Residual value) / Service life

For the first year:

Annual depreciation expense = ($90,000 - $30,000) / 6

= $10,000

For the second year:

Annual depreciation expense = ($90,000 - $30,000) / 6

= $10,000

So, the annual depreciation for the first two years using each method is $10,000.