Question

Tamarisk, Inc. purchased a delivery truck for $29,200 on January 1, 2020. The truck has an expected salvage value of $2,200, and is expected to be driven 100,000 miles over its estimated useful life of 8 years. Actual miles driven were 16,100 in 2020 and 12,800 in 2021.

Required:
Compute depreciation expense for 2020 and 2021 using (1) the straight-line method, (2) the units-of-activity method, and (3) the double-declining-balance method.

Answer 1

1. $3375

$3375

2. $4347

$3456

3 $7300

$5475

Step-by-step explanation:

Straight line depreciation expense = (Cost of asset - Salvage value) / useful life

( $29,200 - $2,200,) / 8 = $3375

depreciation expense each year is $3375

Depreciation expense using the double declining method = Depreciation factor x cost of the asset

Depreciation factor = 2 x (1/useful life) = 2/8 = 0.25

2020 = 0.25 x 29200 = 7300

2021 = 0.25x( 29200 - 7300)

Activity method based on output = (output produced that year / total output of the machine) x (Cost of asset - Salvage value)