Ex 10-7

Linton Company purchased a delivery truck fo $34,000 on January 1, 2017. The truck has an expected s
$2,000, and is expected to be driven 100,000 miles over its estimated useful life of 8 years. Actual mile
15,000 in 2017 and 12,000 in 2018.
Instructions:
(a) Compute depreciation expense for 2017 and 2018 using (1) the straight-line method, (2) the units-o
and (3) the double-declining-balance method.

Solution
1 STRAIGHT LINE METHOD
Cost of Delivery truck 34,000
Salvage value 2,000
Depreciable cost 32,000
Useful Life 8 years
Depreciation:
2017 4,000
2018 4,000

2 UNITS OF ACTIVITY
Depreciable cost/total units of activity= depreciable cost per unit
Total units of activity 100,000 miles
Depreciable cost 32000
depreciable cost per unit 0.32

miles driven in 2017 15,000

miles driven in 2018 12,000

Depreciation:
2017 4,800
2018 3,840

3 DOUBLE DECLINING METHOD

Here, straight line rate 12.5%

book value at the

double declining rate 25% year beginning of year
2017 34,000
2018 25,500
he truck has an expected salvage value of
ife of 8 years. Actual miles driven were

ne method, (2) the units-of-activity method,

annual book value at

depreciation depreciation Accumulated the end of
rate expense depreciation year
25% 8,500 8,500 25,500
25% 6,375 14,875 19,125