Question

# Norika Company purchased a truck for \$36,000. The company expected the truck to have a useful...

Norika Company purchased a truck for \$36,000. The company expected the truck to have a useful life of four years or 128,000 kilometres, with an estimated residual value of \$4,000 at the end of that time. During the first and second years, the truck was driven 22,000 and 32,000 kilometres, respectively.

Calculate the depreciation expense for the second year under the straight-line, units-of-production, and double-diminishing-balance methods. Assume the purchase of the truck was made at the beginning of the first month of the first year. (Round depreciation per kilometre to 2 decimal places, e.g. 1.25 and final answers to 0 decimal places, e.g. 5,275.)

Year 2 Depreciation Expense

Straight-line method \$

Units-of-production method \$

Double-dimishing-balance method \$

Straight-line method:

Year 2 Depreciation Expense = (36,000 - 4,000)/ 4 = \$8,000

Units-of-production method:

Year 2 Depreciation Expense = (36,000 - 4000)/ 128,000 *32,000 = \$8,000

Double-diminishing-balance method:

Double-diminishing-rate = 1/4 *2 = 50%

Year 2 Depreciation Expense = \$36,000*50%*50% = \$9,000

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