Question 1: On January 1, 2011, the Excel Delivery Company purchased a delivery van for $33,000. At the end of its five-year service life, it is estimated that the van will be worth $3,000. During the five-year period, the company expects to drive the van 100,000 miles.
Required:
Calculate annual depreciation for the van using each of the following methods. Round all computations to the nearest dollar.
1. Straight line
2. Sum-of-the-years' digits
3. Double-declining balance
4. Units of production using miles driven as a measure of output, and the following actual mileage:
Year Miles
2011 22,000
2012 24,000
2013 15,000
2014 20,000
2015 21,000
Question 2: On October 1, 2011, the Allegheny Corporation purchased machinery for $115,000. The estimated service life of the machinery is 10 years and the estimated residual value is $5,000. The machine is expected to produce 220,000 units during its life.
Required:
Calculate depreciation for 2011 and 2012 using each of the following methods. Partial-year depreciation is calculated based on the number of months the asset is in service. Round all computations to the nearest dollar.
1. Straight line
2. Double-declining balance
3. Units of production (units produced in 2011, 10,000; units produced in 2012, 25,000)