Question

# On January 1, Duper Company purchased a delivery truck for \$30,000. The company estimates the truck...

On January 1, Duper Company purchased a delivery truck for \$30,000. The company estimates the truck will be driven 80,000 miles over its eight-year useful life. The estimated salvage value is \$6,000. The truck was driven 12,000 miles in the first year. Which method results in the largest depreciation expense in year one?

Select one:

A. Straight-line

B. Double-declining balance

C. Sum-of-the-years' digits

D. Units-of-production

 Ans.(B): Double declining balance method results in the largest depreciation expense in year one of \$6,000 (work. Notes). Working Notes: Straight Line = Cost - Salvage Value / Years of useful Life = (\$30,000 - \$ 6,000) / 8 = \$24,000/8 = 3000 Double Declining balance = 200% of Straight line method = \$3,000 x 200% = \$       6,000 Sum of the years digit = Remaining useful life of the asset x Depreciable cost / sum of the years digit = = 8 x (\$30,000 - \$6,000) / (1+2+3+4+5+6+7+8) = 8 x \$24,000 / 36 = 5333.33 Units of Production method = Depreciable cost x miles driven / miles driven by usefull life = \$24,000 x 12,000 / 80,000 = 3,600

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