Question

On January 1, 2021, the Excel Delivery Company purchased a delivery van for $51,000. At the end of its five-year service life, it is estimated that the van will be worth $6,000. During the five-year period, the company expects to drive the van 171,000 miles. Required: Calculate annual depreciation for the five-year life of the van using each of the following methods.

Answer 1

Answer:

The answer is "Complete but not absolutely right".

Explanation:

In production technique segments, it should first calculate the cost of fuel per mile and afterward measure the depreciation.

$\ per \ mile \ rate = \frac{\ cost - \ salvage value}{\ Estimated \ mile }$

$\ estimated \ mile = 171000 \\\\\ per \ mile \ rate = (\ 51000 - \ 6000) / 171000 \\\\ \ per \ mile \ rate = 45000 / 171000 = \\\\\ per \ mile \ rate = \ 0.263157894 per mile$

Calculating Depreciation:

$\ Depreciation \ expense = \ per \ mile \ rate \times \ Mile \ drives$

$\ Depreciation \ for \ 2021 : \\\\ \ Mile \ drives \ = 11000 \\\ Depreciation = \ 0.263157894 * 11000 \\\ Depreciation = \ 2895$

$\ Depreciation \ for \ 2022 \ : \\\\\ Miles \ drives = 42000\\\ Depreciation = \ 0.263157894 * 42000\\ \ Depreciation = 11053 \\\\\ Depreciation \ for \ 2023 \ :\\\\\ Miles \ drives = 43000\\\ Depreciation = \ 0.263157894 * 43000 \\\ Depreciation = \ 11316 \\\\\ Depreciation \ for \ 2024 \ :$

$\ Miles \ drives = 38000\\\ Depreciation = \ 0.263157894 * 38000 \\\ Depreciation = \ 10000 \\\\\ Depreciation \ for \ 2025 \ :\\\\\ Miles \ drives = 39000\\\ Depreciation = \ 0.263157894 * 39000 \\\ Depreciation = \ 10263$