Answer:
1. Depreciation for year 1 on straight line method $ 9,100
Depreciation for year 2 on straight line method $ 9,100
2. Depreciation for year 1 on double declining method $ 20,200
Depreciation for year 2 on double declining method $ 11,,500
3. Depreciation for year 1 on activity based method $ 9,280
Depreciation for year 2 on activity based method $ 9,920
Explanation:
Straight Life Depreciation
Cost of delivery van $ 43,200
Salvage Value at end of life ($ 6,800)
Depreciable value $ 36,400
Straight Line Depreciation per year is calculated by dividing the depreciable value by the useful life:
$ 36.400/4 = $ 9,100. Since it is equal amounts over the useful life of the asset,the depreciation amount is same for year 1 and year 2
Double declining balance Depreciation
In a double declining balance method of depreciation, the depreciation rate in the first year is double percentage of Straight line method, this does not consider salvage value. The percentage rate shall therefore be 100/4 *2 = 50 %
Cost of delivery van $ 43,200
Straight Line depreciation based on 4 years life $ 10,100
Double the Straight Line method in first year
so depreciation in year 1 is $ 10,100 * 2 $ 20,200
The depreciation base for year 2 shall be
Cost of delivery van $ 43,200
Depreciation for year 1 $ 20,200
Depreciable base for year 2 $ 23,000
Depreciation for year 2 @ 50 % $ 11,500
Activity based Depreciation
Cost of delivery van $ 43,200
Salvage Value at end of life ($ 6,800)
Depreciable value $ 36,400
Expected usage 227,500 miles
Depreciation per mile is 227,500 miles / Depreciable Value $ 36,400 $ 0.16 per mile
Depreciation for year 1 on 58,000 miles is 58,000 * 0.16 = $ 9,280
Depreciation for year 2 on 62,000 miles is 62,000 * 0.16 = $ 9,920
