Question

On January 1, 2012, AB Ltd buys a truck for $42,000 cash. It has estimated residual value of $2,000, and an estimated lie of 4 years, or 200,000 miles. The truck drove 40,000 miles in 2012, 60,000 miles in 2013, 80,000 miles in 2014, and 20,000 miles in 2015.

Assuming the company uses the units-of production method of depreciation complete the following table and show your computation/workings for the figures shown as the annual depreciation expense.

Assuming the company uses the Double-declining balance method of depreciation complete the following table and show your computation/workings for the figures shown as the annual depreciation expense.

Assuming the company uses the straight-line method of depreciation complete the following table and show your computation/workings for the annual depreciation expense.

Answer 1

a) Unit of production method :

Depreciation expense per mile = (42000-2000)/200000 = 0.20

	Unit of production	Depreciation expense per mile	Annual Depreciation expense
2012	40000	0.20	8000
2013	60000	0.20	12000
2014	80000	0.20	16000
2015	20000	0.20	4000
Total			40000

b) Double decline balance

	Beginning book value	Depreciation rate	Annual Depreciation expense
2012	42000	50%	21000
2013	21000	50%	10500
2014	10500	50%	5250
2015	5250	50%	3250
Total			40000

c) Straight line method

	Annual Depreciation expense
2012	40000/4 = 10000
2013	10000
2014	10000
2015	10000
Total	40000