Speedy Delivery Company purchases a delivery van for $28,000. Speedy estimates that at the end of its four-year service life, the van will be worth $4,000. During the four-year period, the company expects to drive the van 120,000 miles.

Actual miles driven each year were 28,000 miles in year 1; 32,000 miles in year 2; 20,000 miles in year 3; and 24,000 miles in year 4. Note that actual total miles of 104,000 exceed expectations by 4,000 miles

Required:

Calculate annual depreciation for the four-year life of the van using each of the following methods.

1. Straight-line. Year: Annual Depreciation : $ 24,000

2. Double-declining-balance. Year: Annual Depreciation: $ 26,000

Explanation:

I think your question is missed of key information, allow me to add in and hope it will fit the original one.

Calculate annual depreciation for the four-year life of the van using each of the following methods:

1. Straight-line. Year: Annual Depreciation12

2. Double-declining-balance. Year: Annual Depreciation12

My answer:

Cost of the van: $28,000

Salvage Value at end of life: $4,000

Depreciation on a straight line basis is calculated thus:

Cost - Residual value / useful life

= (28,000 - 4000) / 4

= 6,000 per year

The depreciation amount is same for year 1 and year 2 is $6,000

So we have:

Cost of delivery van $ 28,000

Salvage Value at end of life ($ 4,000)

Depreciable value $ 24,000

Depreciation on double declining method is calculated

100% / useful life

100%/4*2 = 50

Cost - residual value * 50%

= $28,000 - $4,000*0.5 = $26000

The depreciation amount is same for year 1 and year 2 is $26000/2 = $13,000

So we have:

Cost of delivery van $ 28,000

Salvage Value at end of life ($ 2,000)

Depreciable value $ 26,000