Answer:
1. Using Straight-line method
Depreciation expense for 2020: $3,250
Depreciation expense for 2021: $3,250
2. Using Units-of-activity method
Depreciation expense for 2020: $3,770
Depreciation expense for 2021: $2,860
3. Using Double-declining-balance method
Depreciation expense for 2020: $6,500
Depreciation expense for 2021: $4,875
Explanation:
The units-of-production depreciation method is calculated by using the following formula:
Depreciation Expense = [(Cost of asset − Salvage Value) x Number of Units Produced]/Life in Number of Units = Depreciation Expense per unit x Number of Units Produced
In tSwifty Corporation,
Depreciation Expense per mile
= ($28,000 - $2,000)/100,000 = $0.26
1. Assuming Swifty Corporation uses Straight-line method
Annual Depreciation Expense = (Cost of asset − Salvage Value)/Useful Life = ($28,000 - $2,000)/8 = $3,250
Depreciation expense for 2020: $3,250
Depreciation expense for 2021: $3,250
2. Assuming Swifty Corporation uses Units-of-activity method
Depreciation expense each year = Actual miles driven x Depreciation Expense per mile
Depreciation expense for 2020 = 14,500 x $0.26 = $3,770
Depreciation expense for 2021 = 11,000 x $0.26 = $2,860
3. Assuming Swifty Corporation uses Double-declining-balance method
Under the straight-line method, useful life is 8 years, so the asset's annual depreciation will be 12.5% of the Depreciable cost.
Depreciable cost = Total asset cost - salvage value = $28,000-$2,000 = $26,000
Under the double-declining-balance method the 12.5% straight line rate is doubled to 25% - multiplied times the Depreciable cost's book value at the beginning of the year.
In 2020, depreciation expense = 25% x $26,000 = $6,500
At the beginning 2021, the Depreciable cost's book value is $26,000-$6,500 = $19,500
Depreciation expense in 2021 = 25% x $19,500 = $4,875
