Preston Corporation purchased a truck for $40,000. The company expected the truck to last four years...

Question

Preston Corporation purchased a truck for $40,000. The company expected the truck to last four years or 100,000 miles, with an estimated residual value of $4,000 at the end of that time. During the second year, the truck was driven 27,500 miles. Compute the depreciation for the second year under each of the following methods: (a) straight-line, (b) production, and (c) double-declining-balance. (Show your work.)

David · Accepted Answer

Cost 40000 
  
salvage 4000 
  
life 4 

depreciation method straight line production double declining 
expense for second 
year 9000 4000 11000
 
(40000-4000)/4 (40000/10000)*1000 (40000/100000)*27500 
  
(assuming 10000 units 
  
total and 1000 units produced 
  
in second year)

Preston Corporation purchased a truck for $40,000. The company expected the truck to last four years or 100,000 miles, with an estimated residual value of $4,000 at the end of that time. During the...

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