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Weller Company purchased a truck for $66,000. The company expected the truck to last four years or 100,000 miles, with an estimated residual value of $6,000 at the end of that time. During the second year the truck was driven 27,000 miles. Compute the depreciation for the second year, under each of the methods below and place your answers in the blanks provided. Units-of-activity $ Double-declining-balance

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Answer:

Double declining = $16,500

Unit of activity = $16,200

Explanation:

Depreciation is used in expensing the cost of an asset.

Deprecation expense using the double declining method :

Depreciation factor x cost of the asset / book value

Depreciation factor = 2 × (1/ useful life) = 2 /4 = 1/2

Deprecation expense in the first year = 0.5 x $66,000 = $33,000

Book value in year 1 = $66,000 - $33,000 = $33,000

Depreciation expense in year 2 = 0.5 × $33,000 = $16,500

Unit of activity = (miles driven in year 2 / total miles ) × ( cost of asset - Salvage value)

(27,000 / 100,000) x ($66,000 - $6,000)

0.27 x $60,000 = $16,200

I hope my answer helps you

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