Answer:
1. Depreciation expense per mile = $0.25
2. (a) Depreciation expense under straight-line method; 2020 = $2,500; 2021 = $2,500
2. (b) Depreciation expense under double-declining method: 2020 = $5,200; 2021 = $4,160
2. (c) Depreciation expense per mile under the units-of-activity method: 2020 = $3,200; 2021 = $3,000
Explanation:
Req. 1
We know,
Depreciation expense per mile under the units-of-activity method
= [tex]\frac{(Cost - Salvage value)}{Total units of activity (total miles)}[/tex]
Given,
Delivery truck's cost = $26,000
Salvage value = $1,000
Total miles/units of activity = 100,000 miles
Depreciation expense per mile = [tex]\frac{26,000 - 1,000}{100,000}[/tex]
Depreciation expense per mile = $0.25
Req. 2 (A)
We know, Depreciation expense under straight-line method
= [tex]\frac{Purchase price - salvage value}{Useful life}[/tex]
Given,
Useful life = 10 years
From requirement 1, we can get,
Depreciation expense under straight-line method = [tex]\frac{26,000 - 1,000}{10}[/tex]
Depreciation expense = $2,500
Under the straight-line method, the depreciation expense remains same. Therefore, $2,500 is the depreciation expense for 2020 and 2021.
Req. 2 (B)
Again,
Depreciation expense rate under double declining method = (100% ÷ useful life) × 2
Depreciation expense rate = (100% ÷ 10) × 2 = 20%
Depreciation expense (Double-declining balancing method) for 2020
= $26,000 × 20% = $5,200
Depreciation expense (Double-declining balancing method) for 2021
= $(26,000 - 5,200) × 20% = $20,800 × 20% = $4,160
Under double declining method, depreciation expense is reported using the ending balance.
Req. 2 (C)
From Requirement 1, depreciation expense per mile under the units-of-activity method = $0.25
As the delivery truck drove 12,800 miles in 2020, the depreciation expense for 2020 = $0.25 × 12,800 miles = $3,200
As the delivery truck drove 12,000 miles in 2021, the depreciation expense for 2021 = $0.25 × 12,000 miles = $3,000
