Adelivery truck costing $22,000 is expected to have a $2,000 salvage value at the end of its useful life of four years or 100,000 miles. assume that the truck was purchased on january 2. calculate the depreciation expense for the second year using each of the following depreciation methods: (a) straight-line, (b) double-declining balance, and (c) units-of-production. (assume that the truck was driven 30,000 miles in the second year.) round all answers to the nearest dollar.

a) $5,000

b) $5,500

c) $6,000

Explanation:

Given:

Cost of the truck = $22,000

Salvage value = $2,000

Useful life = 4 years or 100,000 miles

Now,

a) straight line method of depreciation

Depreciation =

or

Depreciation =

or

Depreciation = $5,000 per year

therefore,

The depreciation for the second year is $5,000

b) Double-declining balance

Depreciation = 2 × Cost of the asset × Depreciation rate

also,

Depreciation rate =

or

Depreciation rate =

or

Depreciation rate = 25% = 0.25

Therefore,

Depreciation for the first year = 2 × $22,000 × 0.25

or

Depreciation for the first year =  $11000

Thus, value of truck for the second year = Cost - Depreciation

= $22,000 - $11,000

= $11,000

Now,

Depreciation for the second year = 2 × $11,000 × 0.25

or

Depreciation for the first year =  $5,500

c) units-of-production

Depreciation rate =

or

Depreciation rate =

or

Depreciation rate = 0.20

therefore ,

Depreciation for the second year = Miles driven × Depreciation rate

= 30,000 × 0.2

= $6,000

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