Chapter 11, Problem 9E

Lightning Delivery Company purchased a new delivery truck for $45,000 on April 1, 2016. The truck is expected to have a service life of 10 years or 120,000 miles and a residual value of $3,000. The truck was driven 10,000 miles in 2016 and 13,000 miles in 2017. Lightning computes depreciation expense to the nearest whole month.

Required:

1. 1. Compute depreciation expense for 2016 and 2017 (round answers to the nearest dollar) using the:
   1. a. straight-line method
   2. b. sum-of-the-years’-digits method
   3. c. double-declining-balance method
   4. d. activity method
2. 2. For each method, what is the book value of the machine at the end of 2016? At the end of 2017?
3. 3. Next Level Describe the pattern of depreciation expense and book value observed in the above calculations. Under what situations would each method be appropriate?