Swifty company purchased a delivery truck for $26,000 on january 1, 2020. the truck has an expected salvage value of $1,000, and is expected to be driven 100,000 miles over its estimated useful life of 10 years. actual miles driven were 12,800 in 2020 and 12,000 in 2021.

1. Depreciation expense per mile = $0.25

2. (a) Depreciation expense under straight-line method; 2020 = $2,500; 2021 = $2,500

2. (b) Depreciation expense under double-declining method: 2020 = $5,200; 2021 = $4,160

2. (c) Depreciation expense per mile under the units-of-activity method: 2020 = $3,200; 2021 = $3,000

Explanation:

Req. 1

We know,

Depreciation expense per mile under the units-of-activity method

=

Given,

Delivery truck's cost = $26,000

Salvage value = $1,000

Total miles/units of activity = 100,000 miles

Depreciation expense per mile =

Depreciation expense per mile = $0.25

Req. 2 (A)

We know, Depreciation expense under straight-line method

=

Given,

Useful life = 10 years

From requirement 1, we can get,

Depreciation expense under straight-line method =

Depreciation expense = $2,500

Under the straight-line method, the depreciation expense remains same. Therefore, $2,500 is the depreciation expense for 2020 and 2021.

Req. 2 (B)

Again,

Depreciation expense rate under double declining method = (100% ÷ useful life) × 2

Depreciation expense rate = (100% ÷ 10) × 2 = 20%

Depreciation expense (Double-declining balancing method) for 2020

= $26,000 × 20% = $5,200

Depreciation expense (Double-declining balancing method) for 2021

= $(26,000 - 5,200) × 20% = $20,800 × 20% = $4,160

Under double declining method, depreciation expense is reported using the ending balance.

Req. 2 (C)

From Requirement 1, depreciation expense per mile under the units-of-activity method = $0.25

As the delivery truck drove 12,800 miles in 2020, the depreciation expense for 2020 = $0.25 × 12,800 miles = $3,200

As the delivery truck drove 12,000 miles in 2021, the depreciation expense for 2021 = $0.25 × 12,000 miles = $3,000