On January 1, 2021, 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 five-year life of the van using each of the following methods: 1. Straight-line method 2. Double Declining Balance 3. Units of production using miles driven as a measure of output, and the following actual mileage.
Depreciation Methods
The word "depreciation" is defined as an accounting method wherein the cost of tangible assets is spread over its useful life and it usually denotes how much of the assets value has been used up. The depreciation is usually considered as an operating expense. The main reason behind depreciation includes wear and tear of the assets, obsolescence etc.
Depreciation Accounting
In terms of accounting, with the passage of time the value of a fixed asset (like machinery, plants, furniture etc.) goes down over a specific period of time is known as depreciation. Now, the question comes in your mind, why the value of the fixed asset reduces over time.
On January 1, 2021, 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
1. Straight-line method
2. Double Declining Balance
3. Units of production using miles driven as a measure of output, and the following actual mileage.
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