Required informationExercise 7-11 (Algo) Determine depreciation under three methods (LO7-4)Skip to question[The following information applies to the questions displayed below.]On January 1, Speedy Delivery Company purchases a delivery van for $40,800. Speedy estimates that at the end of its four-year service life, the van will be worth $5,600. During the four-year period, the company expects to drive the van 176,000 miles. Actual miles driven each year were 45,000 miles in year 1 and 50,000 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.)Exercise 7-11 (Algo) Part 33. Activity-based.
Question
Required informationExercise 7-11 (Algo) Determine depreciation under three methods (LO7-4)Skip to question[The following information applies to the questions displayed below.]On January 1, Speedy Delivery Company purchases a delivery van for 5,600. During the four-year period, the company expects to drive the van 176,000 miles. Actual miles driven each year were 45,000 miles in year 1 and 50,000 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.)Exercise 7-11 (Algo) Part 33. Activity-based.
Solution
To calculate the annual depreciation for the first two years using the activity-based method, we first need to determine the depreciation per mile. This is done by subtracting the salvage value from the cost of the van and then dividing by the total expected miles.
Depreciation per mile = (Cost of van - Salvage value) / Total expected miles Depreciation per mile = (5,600) / 176,000 miles Depreciation per mile = $0.20 per mile
Next, we multiply the depreciation per mile by the actual miles driven each year to find the annual depreciation.
Year 1 Depreciation = Depreciation per mile * Actual miles driven in year 1 Year 1 Depreciation = 9,000
Year 2 Depreciation = Depreciation per mile * Actual miles driven in year 2 Year 2 Depreciation = 10,000
So, the annual depreciation for the first two years using the activity-based method is 10,000 in year 2.
Similar Questions
On January 1, Speedy Delivery Company purchases a delivery van for $40,800. Speedy estimates that at the end of its four-year service life, the van will be worth $5,600. During the four-year period, the company expects to drive the van 176,000 miles. Actual miles driven each year were 45,000 miles in year 1 and 50,000 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.)
Required informationSkip to question[The following information applies to the questions displayed below.]On January 1, 2024, the Excel Delivery Company purchased a delivery van for $35,700. At the end of its five-year service life, it is estimated that the van will be worth $3,000. During the five-year period, the company expects to drive the van 109,000 miles.Required:Calculate annual depreciation for the five-year life of the van using each of the following methods.1. Straight line.
A company purchased a delivery van for $21,500 with a salvage value of $3,500 on October 1, Year 1. It has an estimated useful life of 4 years. Using the straight-line method, how much depreciation expense should the company recognize on December 31, Year 1?Multiple Choice$94.$5,375.$4,500.$1,792.$1,125.
Exercise 7-15 (Algo) Determine activity-based depreciation (LO7-4)Tasty Subs acquired a food service truck on October 1, 2024, for $26,500. The company estimates a residual value of $3,500 and a four-year service life. It expects to drive the truck 100,000 miles. Actual mileage was 6,000 miles in 2024 and 21,000 miles in 2025. Required:Calculate depreciation expense using the activity-based method for 2024 and 2025, assuming a December 31 year-end. (Do not round your intermediate calculations.)
very Vehicles $172,000 Accumulated Depreciation on Delivery Vehicles $34,400 Delivery Vehicles are depreciated at 20% p.a. on cost. In the Statement of Comprehensive Income, Depreciation on Delivery Vehicles is recorded as
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