Question

Brief Exercise 233 Kinney Company purchased a truck for $66,000. The company expected the truck to last four years or 100,000 miles, with an estimated residual value of $8,000 at the end of that time. During the second year the truck was driven 27,000 miles. Compute the depreciation for the second year under each of the methods below and place your answers in the blanks provided.Units-of-activity $_________

Double-declining-balance $_________

Answer 1

$15,660

$16,500

Step-by-step explanation:

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

Depreciation factor = 2 x (1 / useful life)

2 x (1 / 4 ) = 0.5

The depreciation expense in the first year = 0.5 x $66,000 = $33,000

Book value = $66,000 - $33,000 = $33,000

The depreciation expense in the second year = 0.5 x $33,000 = $16,500

The Units of production method = (miles driven in the second year / estimated total miles that can be driven) x (Cost of asset - Salvage value)

(27,000 / 100,000) × ($66,000 - $8,000)

= 0.27 x $58,000 = $15,660

I hope my answer helps you