Question

Quick-as-Lightning, a delivery service, purchased a new delivery truck for $40,000 on January 1, 2019. The truck is expected to have a useful life of ten years or 150,000 miles and an expected residual value of $3,000. The truck was driven 15,000 miles in 2019 and 13,400 miles in 2020.

1. Calculate the depreciation expense for 2019 and for 2020 under the straight-line method.

2. Calculate the depreciation expense for 2019 and for 2020 under the double-declining balance method.

3. Calculate the depreciation expense for 2021 under the double-declining balance method.

Answer 1

Depreciation per year (as per straight line method) = ( Cost - Estimated salvage value ) / Estimated useful life = ( 40000 - 3000 ) / 10

3700

1.
Year	Depreciation expense
2019	3700
2020	3700

Double declining depreciation rate = ( 100% / Estimated useful life in year ) * 2 = ( 100% / 10 ) * 2

20%

2.
Year	Depreciation expense
2019 [ 40000*20% ]	8000
2020 [ (40000-8000)*20% ]	6400
3.
Year	Depreciation expense
2021 [ (40000-8000-6400)*20% ]	5120