Depreciation Calculations
Response to the following problem:
Garns Photography Company purchased a new car on July 1, 2008, for $26,000. The estimated life of the car was five years or 110,000 miles, and its salvage value was estimated to be $1,000. The car was driven 9,000 miles in 2008 and 24,000 miles in 2009
1. Compute the amount of depreciation expense for 2008 and 2009 using the following methods:
a. Straight-line.
b. Units-of-production.
2. Which depreciation method more closely reflects the used-up service potential of the car? Explain.