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14 May, 10:57

Flounder Company purchased a delivery truck for $33,000 on January 1, 2020. The truck has an expected salvage value of $2,000, and is expected to be driven 100,000 miles over its estimated useful life of 10 years. Actual miles driven were 13,800 in 2020 and 10,200 in 2021. Calculate depreciation expense per mile under units-of-activity method. (Round answer to 2 decimal places, e. g. 0.50.) Depreciation expense per mile 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.

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  1. 14 May, 11:07
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    Through straight line method

    In year 2020 = 3100

    In year 2021 = 3100

    Through double declining method

    In year 2020=6600

    In year 2021 = 5280

    Through activity based

    in year 2020=4544

    in year 2021=3366

    Explanation:

    Through straight line method

    Formula is (Cost-salvage) / Useful years

    So,

    Cost of good is $33000

    Salvage amount is $2000

    Number of useful years 10

    Putting the values

    (33000-2000) / 10

    3100

    As, this is straight line method, depreciation for the next year (2021) would also remain same. 3100

    Through double declining method

    Formula is 2 * depreciation rate

    so, 2 * 1/10

    double declining rate is 1/5

    So, 33000*1/5 = 6600

    6600 for 2020

    Next year (2021),

    Now we would subtract the amount of 6600 (already depreciated) from the 33000.

    So, 33000-6600 = 26400

    Applying the rate, 26400*1/5 = 5280

    So, next year 5280

    Through activity based

    we depreciate the truck according to its usage

    So, in first year it was used 13800 miles. Maximum it can be used for 100,000 miles

    First year 13800/100000 = 13.8% used

    we depreciate then 33000*13.8% = 4554

    So, in 2020 4554

    Next year (2021)

    It was driven 10200 which is 10200/100000 = 10.2%*33000

    So, 0.102*33000 = 3366

    In 2021, depreciation of machine according to the activity based system was 3366
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