Question

Readwell co. uses the units of activity method for depreciation of its delivery vehicle. it paid $60,000 for the vehicle and expects to use it for 5 years before trading it in on a new one. the car dealer has agreed to buy it back for $5,040 if it has less than $200,080 km which is within treadwell’s expectation of km per year on the vehicle. In year 1 the truck logged 38,000 km on the odometer. In year 2 the actual mileage was 28,000 km. In year 3 the actual mileage was 55,000 km. In year 4 the actual mileage was 33,000 km and in year 5 the actual mileage is reaching 20,000 km and there are less than 90 days until the end of the year. Round your answer to the nearest dollar (no cents).

Required 1: what depreciation expense will treadwell co record in year 2? $
Required 2: what depreciation expense will treadwell co record in year 3? $
Required 3: what depreciation expense will treadwell co record in year 4? $
Required 4: what accumulated depreciation will treadwell co report at the end of year 2? $
Required 5: what accumulated depreciation will treadwell co report at the end of year 3? $
Required 6: what accumulated depreciation will treadwell co report at the end of year 4

Answer 1

The depreciation expense for Treadwell Co. in year 2 is $3,930.

Step-by-step explanation:

To calculate the depreciation expense for Treadwell Co. in year 2, we need to determine the number of units of activity (kilometers) that the delivery vehicle has traveled in year 2. In year 1, the vehicle traveled 38,000 km. In year 2, it traveled 28,000 km. Therefore, the depreciation expense for year 2 can be calculated as follows:

Depreciation expense = (Actual mileage / Expected mileage for the year) x (Cost - Estimated residual value)

Depreciation expense for year 2 = (28,000 km / 200,080 km) x ($60,000 - $5,040)

Depreciation expense for year 2 = $3,930