1. Tom's Company purchased a van at a total cost of $55,000. At the end of its useful life of 5
years, the van should have a salvage value of $5,000. The van is expected to be driven 100,000
miles over this time period as follows: year 1 25,000 miles, year 2 30,000 miles, year 3 20,000
miles, year 4 15,000 miles, and year 5 10,000 miles. Prepare a schedule showing the depreciation
expense and year-end carrying value of the van for each of the next two years under each of the
following methods of depreciation:
Solution
1. Straight line
2. Units-of-Production
3. Double-declining-balance
Depreciation expense Year end carrying value
1 10000 45000
2 10000 35000
3 10000 25000
4 10000 15000
5 10000 5000