Question

Porika Company purchased a truck for $57,000. The company expected the truck to last four years or 100,000 miles, with an estimated residual value of $6,000 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

Answer:

Units-of-activity Depreciation : $ 13,770

Double Declining Method Depreciation For the Second Year= $ 9120

Explanation:

Formula:  Units-of-activity Depreciation

Annual Depreciation= Depreciable Value×Units produced during the year/Estimated total production

Annual Depreciation = $ 51,000 * 27000/100,000

                                     = $ 13,770

Depreciable Value = Original cost – Scrap value

Depreciable Value = $57000 - $6000= $ 51000

Formula : Double Declining Method

Double Of Straight Line Method Depreciation Rate = 2 * 1/10= 2* 10%= 20%

20 % of $ 57,000 for the first year=  $ 11,400

Depreciation 20 % of $ 45,600 for the second year= $ 9120